Spencerville Incorporated Applies Manufacturing Overhead at the Rate of $60

question 27

Multiple Choice

Spencerville Incorporated applies manufacturing overhead at the rate of $60 per machine hour. Budgeted machine hours for the current period were anticipated to be 80,000; However, a lengthy strike resulted in actual machine hours being worked of only 65,000. Budgeted and actual manufacturing overhead figures for the year were $4,800,000 and $4,180,000, respectively. On the basis of this information, the company's year-end overhead was:

• A)overapplied by $280,000.
• B)underapplied by $280,000.
• C)overapplied by $620,000.
• D)underapplied by $620,000.
• E)underapplied by $900,000.

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Definitions:

Operating Results

Operating Results refer to the financial outcomes derived from a company's core business operations, excluding non-operating income and expenses, reflecting the company's operational effectiveness.

Operating Capability

Refers to the ability of a company to maintain efficient operations and sufficient capacity to support its business activities.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations by comparing its current assets to its current liabilities.