Karvel Corporation Uses a Predetermined Overhead Rate Based on Machine-Hours

question 160

Multiple Choice

Karvel Corporation uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. For the month of August, Karvel estimated total manufacturing overhead costs at $300,000 and total machine-hours at 75,000 hours. Actual results for the period were manufacturing overhead costs of $290,000 and 75,000 machine-hours. As a result, Karvel would have:

• A) applied more overhead to Work in Process than the actual amount of overhead cost for the year.
• B) applied less overhead to Work in Process than the actual amount of overhead cost for the year.
• C) applied an amount of overhead to Work in Process that was equal to the actual amount of overhead.
• D) found it necessary to recalculate the predetermined overhead rate.

---

Definitions:

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account columns to ensure that total debits equal total credits.

Journal Entry

A record in the books of accounts that represents each business transaction, detailing the accounts and amounts to be debited and credited.

Debit

An entry recorded on the left side of an accounting ledger that increases an asset or expense account, or decreases equity, liability, or revenue accounts.

Credit

An accounting entry that either increases a liability or equity account, or decreases an asset or expense account.