Framingham Company, which uses labor hours to apply overhead to manufacturing, may have increased amounts of underapplied manufacturing overhead at month-end if:
A) Suppliers of direct materials have an across-the-board price increase
B) The company terminates two production supervisors
C) The union representing direct labor negotiates a 4% pay increase, effective retroactively to the beginning of the year
D) An unexpected blizzard closed the factory for three days

Question

Quizplus · Accepted Answer

An unexpected blizzard closing the factory for three days would result in fewer labor hours worked, leading to less overhead being applied, thus increasing the likelihood of underapplied overhead.

Framingham Company, Which Uses Labor Hours to Apply Overhead to Manufacturing