The Gerald Company budgeted overhead at $480,000 for the period for Department A based on a budgeted volume of 60,000 direct labor hours.At the end of the period,the factory overhead control account for Department A had a debit balance of $475,000;actual direct labor hours were 58,000.What was the under- or over applied factory overhead for the period?

Question

Quizplus · Accepted Answer

To calculate the over- or under applied factory overhead, we need to compare the budgeted overhead with the actual overhead. The budgeted overhead rate is $480,000/60,000 hours = $8 per direct labor hour. Therefore, the budgeted overhead for 58,000 actual direct labor hours is $8 x 58,000 = $464,000. The actual overhead is $475,000.

To determine if there is an over- or under applied factory overhead, we subtract the actual overhead from the budgeted overhead:

Budgeted overhead - Actual overhead = $464,000 - $475,000 = $11,000 underapplied

Therefore, the best choice is C, $11,000 underapplied.

The Gerald Company Budgeted Overhead at $480,000 for the Period