The Fast & Furious Company Produces Two Products: Toy Planes

question 129

Multiple Choice

The Fast & Furious Company produces two products: toy planes and toy race cars. They use departmental overhead rates for the two production departments: molding and finishing. Molding uses machine hours to assign overhead and Finishing uses direct labor hours. 50,000 planes and 250,000 race cars are produced. Please find the following data: $$\begin{array} { | l | c | c | c | } \hline & \text { Molding } & \text { Finishing } & \text { T otal } \\\hline \text { Estimated Overhead } & \$ 250,000 & \$ 100,000 & \$ 350,000 \\\hline \text { Actual Overhead } & \$ 240,000 & \$ 120,000 & \$ 360,000 \\\hline & & & \\\hline \text { Expected Direct Labor Hours } & & & \\\hline \text { planes } & 5,000 & 5,000 & 10,000 \\\hline \text { race cars } & 5,000 & 35,000 & 40,000 \\\hline \text { Expected Machine Hours } & & & \\\hline \text { planes } & 17,000 & 3,000 & 20,000 \\\hline \text { race cars } & 3,000 & 7,000 & 10,000 \\\hline \text { Actual Direct Labor Hours } & & & \\\hline \text { planes } & 4,500 & 5,300 & 10,000 \\\hline \text { race cars } & 5,500 & 34,500 & 40,000 \\\hline \text { Actual Machine Hours } & & & \\\hline \text { planes } & 16,500 & 3,500 & 20,000 \\\hline \text { race cars } & 3,200 & 6,800 & 10,000 \\\hline\end{array}$$
How much was overhead over or underapplied?

• A)$14,250
• B)$10,000
• C)$ 4,250
• D)none of these

---

Definitions:

Auditor Independence

A foundational principle that auditors must be unbiased and impartial with respect to the financial statements and other information they audit.

Sarbanes-Oxley Act

The Sarbanes-Oxley Act is a U.S. law enacted to protect investors from fraudulent accounting activities by corporations.