Adams Manufacturing Allocates Overhead to Production on the Basis of Direct

question 7

Multiple Choice

Adams Manufacturing allocates overhead to production on the basis of direct labor costs.At the beginning of the year,Adams estimated total overhead of $396,000; materials of $410,000 and direct labor of $220,000.During the year Adams incurred $418,000 in materials costs,$413,200 in overhead costs and $224,000 in direct labor costs.
-Compute the amount of under- or overapplied overhead for the year.

• A)$10,000 overapplied.
• B)$17,200 overapplied.
• C)$10,000 underapplied.
• D)$17,200 underapplied.
• E)$4,800 underapplied.

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Definitions:

Direct Materials

The raw materials that can be directly attributed to the production of a product.

Manufacturing Overhead

All production costs other than direct materials and direct labor, including expenses such as maintenance, utilities, and depreciation on manufacturing facilities.

Capital Expenditure Budget

A budget for planning and controlling spending on long-term assets, including buildings, equipment, and technology, intended for future operations.

Long-Term Assets

Assets that are expected to provide economic benefits over a period longer than one year, such as buildings and equipment.