Nil Co Uses a Predetermined Overhead Rate Based on Direct Labour

question 1

Multiple Choice

Nil Co. uses a predetermined overhead rate based on direct Labour cost to apply manufacturing overhead to jobs. For the year ended December 31, Nil's estimated manufacturing overhead was £600,000, based on an estimated volume of 50,000 direct Labour hours, at a direct Labour rate of £6.00 per hour. Actual manufacturing overhead amounted to £620,000, with actual direct Labour cost of £325,000. For the year, manufacturing overhead was

• A)overapplied by £20,000.
• B)underapplied by £22,000.
• C)overapplied by £30,000.
• D)underapplied by £30,000.

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Definitions:

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