Collins Company Uses a Job Costing System and Allocates Overhead

question 52

Multiple Choice

Collins Company uses a job costing system and allocates overhead using an estimated overhead allocation rate based on direct labour hours. Information for 2017 is as follows: $\begin{array}{lrr}&\text { Estimated }&\text { Actual }\\\text { Manufacturing overhead } & \$ 166,500 & \$ 165,000 \\\text { Direct labour hours } & 50,000 & 60,000\end{array}$ The amount of over- or underapplied overhead for 2017 was:

• A) $1,500 underapplied
• B) $3,000 underapplied
• C) $1,500 overapplied
• D) $34,800 overapplied

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Definitions:

Present Value

Today's value of a future money sum or cash flow sequence, calculated using a predetermined return rate.

Lifecycle

The series of stages that an entity—such as a product, project, or individual—goes through during its existence, from inception to termination or renewal.

Marginal Cost

The increase or decrease in the total cost that arises from producing one additional unit of a product or service.

Breakeven Price

The sales amount at which a business neither makes a profit nor incurs a loss, covering all its costs.