At year-end,Factory Overhead is:A) Overapplied by $20,000.B) Overapplied by $190,000.C) Underapplied by $20,000.D) Overapplied by $40,000.E) Neither overapplied nor underapplied.

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Angela Avila · Accepted Answer

Final Answer : C, Explanation :  The predetermined overhead rate is calculated as follows:Predetermined Overhead Rate = Estimated Total Overhead Costs / Estimated Direct Labor CostsPredetermined Overhead Rate = $400,000 / $2,000,000 = $0.20 per dollar of direct labor costsUsing this rate, we can calculate the total overhead cost that should have been applied to the actual direct labor costs:Overhead Applied = Predetermined Overhead Rate x Actual Direct Labor CostsOverhead Applied = $0.20 x $1,800,000 = $360,000Since the actual overhead costs were less than the overhead applied, the overhead is underapplied by $20,000.

At year-end,Factory Overhead is:

A) Overapplied by $20,000.
B) Overapplied by $190,000.
C) Underapplied by $20,000.
D) Overapplied by $40,000.
E) Neither overapplied nor underapplied.

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