Beaver Company Used a Predetermined Overhead Rate Last Year of $2

question 9

Multiple Choice

Beaver Company used a predetermined overhead rate last year of $2 per direct labour hour,based on an estimate of 25,000 direct labour hours to be worked during the year.Actual costs and activity during the year were: The underapplied or overapplied overhead last year was:

• A) $1,000 underapplied.
• B) $1,000 overapplied.
• C) $3,000 overapplied.
• D) $2,000 underapplied.

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Definitions:

Allocation of Limited Resources

The process of distributing scarce resources among various projects or business units.

Incremental Costs

The additional costs incurred when producing an additional unit of a product or service.

Fixed Manufacturing Costs

Costs that do not change with the level of production, such as rent, salaries, and insurance, which are incurred regardless of output volume.

Full Capacity

The maximum level of output that a company can sustain to make a product or provide a service.