Walter Company Uses a Job-Order Costing System to Account for Product

question 156

Multiple Choice

Walter Company uses a job-order costing system to account for product costs.The following information pertains to the current year: $\begin{array}{lr}\text { Materials placed into production } & \$ 140,000 \\\text { Indirect labour } & 40,000 \\\text { Direct labour (10,000 hours) } & 160,000 \\\text { Depreciation of factory building } & 60,000 \\\text { Other factory overhead } & 100,000 \\\text { Increase in work-in-process inventory } & 30,000\end{array}$ Factory overhead rate is $18 per direct labour hour.
What is the amount of underapplied or overapplied overhead for Walter Company in the current year?

• A)$20,000 underapplied
• B)$20,000 overapplied
• C)$40,000 underapplied
• D)$40,000 overapplied

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Definitions:

Fixed Payments

Regular, equal amounts paid over a specified period until the total amount of debt is paid off.

Security Agreement

A legal document that provides a lender a security interest in a specific asset or property pledged as collateral.

Secured Goods

Items that are used as collateral for a loan or are subject to a security interest, ensuring the fulfillment of an obligation.

Acceleration

A provision in a mortgage agreement that allows the mortgagee to demand the entire balance due when the mortgagor misses a single installment payment.