Beaver Company Used a Predetermined Overhead Rate Last Year of $2

question 4

Multiple Choice

Beaver Company used a predetermined overhead rate last year of $2 per direct labor-hour,based on an estimate of 25,000 direct labor-hours to be worked during the year.Actual costs and activity during the year were: $\begin{array}{llcc} \text { Actual manufacturing overhead cost incurred } &\$47,000 \\\text {Actual direct labor-hours worked } &24,000\end{array}$
The underapplied or overapplied overhead last year was:

• A)$1,000 underapplied
• B)$1,000 overapplied
• C)$3,000 overapplied
• D)$2,000 underapplied

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Definitions:

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit, indicating the amount each unit contributes to covering fixed costs and generating profit.

Degree of Operating Leverage

A financial ratio that measures the percentage change in operating income in response to a percentage change in sales.

Forecasted Contribution Margin

An estimated metric that indicates the difference between sales revenue and variable costs of goods sold, used to predict the profitability of sales.

Contribution Margin

The difference between sales revenue and variable costs, used to cover fixed costs and to generate profit.