Small Budget Production Uses a Predetermined Overhead Rate Based Upon

question 30

Short Answer

Small Budget Production uses a predetermined overhead rate based upon direct labour hours.The firm has the following budgeted and actual data for the current year: $\begin{array} { l c } \text { Budgeted factory overhead cost } & \$ 5,000 \\ \text { Actual factory overhead cost } & \$ 6,000 \\ \text { Budgeted direct labour hours } & 1,000 \\ \text { Actual direct labour hours } & 1,100 \end{array}$
What was the amount of under-or ov er-applied overhead for the year?
a. $\$ 500$ overapplied
b. $\$ 500$ underapplied
c. $\$ 1,000$ underapplied
d. $\$ 1,000$ overapplied

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Definitions:

Maturity Value

Maturity Value is the amount to be paid to the holder of a financial instrument at its maturity date, including the principal and any remaining interest.

Notes Receivable (New)

Financial assets representing written promises for payments to be received by a party, usually including interest.

Notes Receivable (Old)

Financial assets representing amounts due to be received from debtors under formal agreements or promissory notes that are no longer current.

Interest Income

Income earned from investing in interest-bearing financial instruments, such as bonds, savings accounts, or loans.