Nexus Corporation Uses a Predetermined Overhead Rate Based on Direct

question 141

Multiple Choice

Nexus Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. Last year, the company's estimated manufacturing overhead was $1,200,000 and its estimated level of activity was 50,000 direct labor-hours. The company's direct labor wage rate is $12 per hour. Actual manufacturing overhead amounted to $1,240,000, with actual direct labor cost of $650,000. For the year, manufacturing overhead was:

• A) overapplied by $60,000.
• B) underapplied by $60,000.
• C) overapplied by $40,000.
• D) underapplied by $44,000.

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