If a Manufacturer Underestimated the Manufacturing Overhead Budget and Overestimates

question 42

Multiple Choice

If a manufacturer underestimated the manufacturing overhead budget and overestimates the activity base for the year, what is the result?

• A) Overapplied factory overhead
• B) Underapplied factory overhead
• C) Overstated finished goods inventory
• D) Understated work in process inventory

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Definitions:

Cumulative

Cumulative refers to the total amount accumulated over a period of time, adding up all parts or elements.

Dividends

Payments made by a corporation to its shareholder members, usually derived from the company's profits, distributed as an incentive to keep investing in the company.

Stated Liquidation Value

The predetermined amount per share that shareholders are guaranteed to receive in the event of the company's liquidation as specified in the corporate charter or bond covenant.

Preferred Stock

A class of ownership in a corporation with a fixed dividend that must be paid out before dividends to common stockholders, and with generally no voting rights.