Bayest Manufacturing Corporation uses a predetermined overhead rate based on dir

Question

Bayest Manufacturing Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, the Corporation worked 57,000 actual direct labor-hours and incurred $392,000 of actual manufacturing overhead cost. The Corporation had estimated that it would work 60,400 direct labor-hours during the year and incur $356,360 of manufacturing overhead cost. The Corporation's manufacturing overhead cost for the year was:

Multiple Choice

underapplied by $55,700

overapplied by $55,700

underapplied by $35,640

overapplied by $35,640

Explanation / Answer

Predetermined overhead rate = $356,360/60,400 =$5.9

Direct labour hrs = 57,000

Applied manufacturing overhead = $5.9*57,000 = $336,300

Actual manufacturing overhead = $392,000

Underapplied overhead = $392,000-$336,300 = $55,700

Ans is option A

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