Answer:
C) underapplied overhead of $5,000
Explanation:
If the Actual Overheads > Applied Overheads, we say overheads are under-applied.
and
If the Applied Overheads < Actual Overheads, we say overheads are over-applied.
where,
Applied Manufacturing Overheads = Predetermined Overhead Rate × Actual Hour
and
Predetermined Overhead Rate = Estimated Overhead ÷ Estimated Total Hours
= $100,000 ÷ 10,000
= $10.00 per direct labor hour
Thus,
Applied Manufacturing Overheads = $10.00 x 10,500 direct labor hours
= $105,000
therefore,
Actual Manufacturing Overheads = $110,000
Applied Manufacturing Overheads = $105,000
Overheads under-applied = $5,000 ( $110,000 - $105,000)
