Mitchell's Softball Gloves Company estimated the following at the beginning of the year:
Mitchell uses departmental overhead rates.In the assembly department, direct labor hours are used to apply overhead.Machine hours are used to apply overhead in the testing department.
Actual data for August is as follows:

Using departmental overhead rates, which of the following is correct?
A) Applied overhead for the assembly department is $54,000.
B) Applied overhead for the testing department is $4,860.
C) Applied overhead for both departments combined is $63,720.
D) Overhead for the assembly department is underapplied.
E) None of these are correct.

Question

Mitchell's Softball Gloves Company estimated the following at the beginning of the year: 
 Mitchell uses departmental overhead rates.In the assembly department, direct labor hours are used to apply overhead.Machine hours are used to apply overhead in the testing department.
Actual data for August is as follows:
 
 Using departmental overhead rates, which of the following is correct?
A) Applied overhead for the assembly department is $54,000. 
B) Applied overhead for the testing department is $4,860. 
C) Applied overhead for both departments combined is $63,720. 
D) Overhead for the assembly department is underapplied. 
E) None of these are correct.

Quizplus · Accepted Answer

Assembly applied overhead = $4 per direct labor hour × 13,500 direct labor hours = $54,000
Testing applied overhead = $2 per machine hour × 11,000 = $22,000
Combined applied overhead = $54,000 + $22,000 = $76,000
Overhead for the assembly department is overapplied ($54,000 applied -$42,000 actual)

Mitchell's Softball Gloves Company Estimated the Following at the Beginning