Snappy Company Has a Job-Order Costing System and Uses a Predetermined

question 29

Multiple Choice

Snappy Company has a job-order costing system and uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Manufacturing overhead cost and direct labor hours were estimated at $100,000 and 40,000 hours, respectively, for the year. In July, Job #334 was completed at a cost of $5,000 in direct materials and $2,400 in direct labor. The labor rate is $6 per hour. By the end of the year, Snappy had worked a total of 45,000 direct labor-hours and had incurred $110,250 actual manufacturing overhead cost.
-Snappy's manufacturing overhead for the year was:

• A)$10,250 underapplied
• B)$12,500 overapplied
• C)$12,500 underapplied
• D)$2,250 overapplied

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Definitions:

Direct Material

Raw input directly utilized in the creation of a product, essential for the product’s production process.

Direct Labor

The wages and other compensation paid to employees directly involved in producing goods or providing services.

Overhead

General business expenses not directly attributed to creating a product or service.

Incremental Revenue

The additional revenue generated from a specific action or decision, beyond what would have been generated without it.