Overhead Costs Are Underapplied If the Amount Applied to Work

question 31

Multiple Choice

Overhead costs are underapplied if the amount applied to Work in Process is:

• A)greater than estimated overhead.
• B)less than estimated overhead.
• C)greater than actual overhead incurred.
• D)less than actual overhead incurred.

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Definitions:

Manufacturing Overhead

All indirect costs associated with manufacturing a product, excluding direct material and direct labor costs.

Raw Materials

The unprocessed materials used in manufacturing to produce goods, ranging from metals and plastics to food ingredients and textiles.

Indirect Materials

Materials used in the production process that cannot be directly linked to specific products, such as lubricants for machinery.

Work in Process

Inventory of partially finished goods that includes the cost of raw materials, labor, and overhead expenses incurred.