Sullivan Company Uses a Predetermined Overhead Rate Based on Direct

question 145

Multiple Choice

Sullivan Company uses a predetermined overhead rate based on direct labour hours to allocate manufacturing overhead to jobs. The company estimated that it would incur $500,000 of manufacturing overhead during the year and that 100,000 direct labour hours would be worked. During the year, the company actually incurred manufacturing overhead costs of $590,000 and 120,000 direct labour hours were worked.

By how much was manufacturing overhead overallocated or underallocated for the year?

• A) $10,000 underallocated
• B) $10,000 overallocated
• C) $90,000 underallocated
• D) $90,000 overallocated

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Definitions:

Formal Authority

The power or right to give orders, make decisions, and enforce obedience, usually established through a hierarchical structure within an organization.

Forcing

A conflict resolution strategy where one party insists on its position regardless of the impact on others.

Avoidance

A conflict management strategy where parties ignore the problem at hand, or distance themselves from the conflict to avoid confrontations.

Problem Solving

The process of identifying a problem, developing potential solutions, and implementing a solution.