Carlo Company Uses a Predetermined Overhead Rate Based on Direct

question 3

Multiple Choice

Carlo Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs.The company estimated manufacturing overhead at $255,000 for the year and direct labour hours at 100,000 hours.Actual manufacturing overhead costs incurred during the year totalled $270,000;actual direct labour hours were 105,000.What was the overapplied or underapplied overhead for the year?

• A) $2,250 overapplied.
• B) $2,250 underapplied.
• C) $15,000 overapplied.
• D) $15,000 underapplieD.
• OH rate = $255,000/100,000 hrs.= $2.55/hr.Actual overhead = $270,000 therefore Underapplied $2,250

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Definitions:

Rent Expense

The cost incurred from leasing property or equipment for business operations, recognized on the income statement.

Fees Earned

Income received from providing services.

Wages Expense

The total cost incurred by a business for the payment of wages to employees for a specific period.

Proprietorship

A proprietorship, also known as a sole proprietorship, is a type of business that is owned and run by one individual and where there is no legal distinction between the owner and the business entity.