If Overhead Is Applied on the Basis of Direct Labor

question 6

Multiple Choice

If overhead is applied on the basis of direct labor hours, and actual hours worked are less than budgeted, which of the following is true, assuming estimated overhead is correct?

• A) Overhead is probably overapplied.
• B) Overhead is probably underapplied.
• C) Applied overhead and actual overhead are equal.
• D) None of these is true.

Understand the concepts of standard costing, including standard quantities, rates, and cost variance analysis.

Calculate and interpret variances in direct materials, direct labor, and manufacturing overhead.

Analyze the impact of actual production activities against standard cost benchmarks.

Understand the purpose and calculation of labour rate and efficiency variances.

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