Question

Manufacturing overhead applied on the basis of direct labor-hours was $120,000, while actual manufacturing overhead incurred was $124,000 for the month of April. Which of the following is always true given the statement above?a. Actual direct labor-hours were less than budgeted direct labor-hours.
b. Actual direct labor-hours exceeded budgeted direct labor-hours.
c. Overhead was overapplied by $4,000.
d. Overhead was underapplied by $4,000.

Answer 1

Answer:

D) Overhead was underapplied by $4,000.

Explanation:

Overhead is underapplied when the actual balance in the manufacturing overhead control account is larger than the balance in the applied manufacturing overhead account.

In this case, the balance of the manufacturing overhead control is $124,000 while the balance of the applied manufacturing overhead account is $120,000. This means that actual overhead costs were $4,000 higher than budgeted.