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A Manufacturing Company Applies Factory Overhead Based on Direct Labor

question 174

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A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be $360,000 and direct labor hours would be 30,000. Actual factory overhead costs incurred were $377,200, and actual direct labor hours were 36,000. What is the amount of overapplied or underapplied manufacturing overhead at the end of the year?


Definitions:

Vertical Axis

The “up-down” or “north-south” measurement line on a graph or grid.

After-Tax Income

The amount of income left to an individual or business after all federal, state, and local taxes have been applied.

Consumption

The process by which goods and services are used up or utilized by individuals or entities.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage.

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