Sai Company Uses a Job Order Cost System and Applies

question 21

Multiple Choice

Sai Company uses a job order cost system and applies manufacturing overhead costs to jobs using a predetermined overhead rate based on direct labour-hours. The following data were extracted from the company's accounting records for Year 6
$\begin{array}{|l|r|r|}\hline & \text { Estimated } & \text { Actual } \\\hline \begin{array}{l}\text { Manufacturing overhead } \\\text { costs }\end{array} & \$ 50,000 & \$ 54,000 \\\hline \text { Direct labour hours } & 20,000 \text { hours } & 24,000 \text { hours } \\\hline\end{array}$
Job \#461 was completed during the year and the following costs had been incurred on that job:
$\begin{array}{|l|r|}\hline \text { Direct materials: } & \$ 4,000 \\\hline \text { Direct labour: } & \$ 1,500 \text { (at } \$ 5.00 \text { per direct labour hour) } \\\hline\end{array}$

-How much of any underapplied or overapplied overhead would have been due to the fact that the estimated overhead costs were different from the actual?

• A) $4,000.
• B) $6,000.
• C) $10,000.
• D) $14,000.

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Definitions:

Stock Dividend

A stock dividend is a distribution of additional shares of a company's stock to its shareholders instead of cash dividends.

Paid-in Capital

The amount of money that a company has received from shareholders in exchange for shares of stock.

Stock Dividend

A form of dividend payment made in shares rather than cash, which increases the number of shares held by each shareholder.

Retained Earnings

The portion of a company's accumulated net income that is not distributed to shareholders as dividends but is kept as reserves for reinvestment in the business operations.