Barnes Company Applies Overhead on the Basis of Machine Hours

question 126

Multiple Choice

Barnes Company applies overhead on the basis of machine hours. Given the following data, compute overhead applied and the under- or overapplication of overhead for the period: $\begin{array}{lr}\text { Estimated annual overhead cost } & \$ 3,000,000 \\\text { Actual annual overhead cost } & \$ 2,970,000 \\\text { Estimated machine hours } & 300,000 \\\text { Actual machine hours } & 295,000\end{array}$

• A)$2,950,000 applied and $20,000 overapplied
• B)$3,000,000 applied and $20,000 overapplied
• C)$2,950,000 applied and $20,000 underapplied
• D)$2,970,000 applied and neither under- nor overapplied

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Definitions:

Current Liability

Financial obligations or debts that a company is expected to settle within one year or within its normal operating cycle.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the business's normal operating cycle, whichever is longer.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities; essentially the net worth of a company.