Sawyer Manufacturing Company Uses a Predetermined Overhead Rate Based on Direct

question 80

Multiple Choice

Sawyer Manufacturing Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. Last year, the company worked
57,000 actual direct labour hours and incurred $345,000 of actual manufacturing overhead cost. The Company had estimated that it would work 55,000 direct labour hours during the year and incur $330,000 of manufacturing overhead cost. The company's manufacturing overhead cost for the year was:

• A)overapplied by $3,000.
• B)underapplied by $3,000.
• C)overapplied by $15,000.
• D)underapplied by $15,000.

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Definitions:

Turnover

A financial metric indicating the rate at which inventory is sold or the rate at which employees leave and are replaced in a business.

Net Operating Income

The profit a company generates from its operations, excluding taxes and interest, calculated as revenues minus expenses.

Operating Assets

Assets used by a business in its day-to-day operations to generate revenue, excluding investments and non-essential assets.

Return On Investment

An evaluation tool for gauging the productivity or returns of an investment, achieved by dividing the net earnings by the investment's expense.