Brainpower Pty Ltd Is an Advertising Agency That Uses a Job

question 78

Multiple Choice

Brainpower Pty Ltd is an advertising agency that uses a job costing system. Brainpower applies overhead to jobs based on direct professional labour hours. At the beginning of the year, overhead was estimated to be $75 000, direct professional labour hours were estimated to be 15 000, and direct professional labour cost was projected to be $225 000. During the year, Brainpower incurred actual overhead of $80 000, actual direct labour hours of 14 500 and actual direct labour cost of $222 000. What was Brainpower's overapplied or underapplied overhead during the year?

• A) $5000 underapplied
• B) $5000 overapplied
• C) $7500 underapplied
• D) $7500 overapplied

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Definitions:

Accrual

Accrual is an accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur.

Balance Sheet

A document showcasing a business's assets, liabilities, and owner's equity at a certain point in time.

Rent Paid

The amount of money paid by a tenant to a landlord for the use of property or space over a specified period.

Capital

The financial resources businesses use to fund their operations, including equity, debt, and retained earnings.