Manufacturing Overhead applied was $60,000, while actual overhead incurred was $62,000. Which of the following is always true of this situation?
A) Overhead was overapplied by $2,000
B) Overhead was underapplied by $2,000
C) Direct labor activity was overestimated
D) This difference must be reported as a loss for the period

Question

Quizplus · Accepted Answer

Manufacturing overhead was underapplied because the actual overhead costs ($62,000) were higher than the overhead costs applied to products ($60,000), resulting in a $2,000 shortfall.

Manufacturing Overhead Applied Was $60,000, While Actual Overhead Incurred Was