Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 56

For the following questions, circle the best response.

Sterner Company computes its predetermined overhead application rate using direct labor hours as the activity base. Estimated and actual overhead costs and direct labor hours for the year were as follows:

	Estimated	Actual
Manufacturing overhead costs	$126,000	$118,020
Direct labor hours	10,000	9,200

Based on this information, manufacturing overhead was

a. underapplied by $2,100.

b. underapplied by $3,420.

c. overapplied by $3,420.

d. overapplied by $5,580.

e. none of the above.

Step 1 of 2

The correct option is (a):

“,

, and

”.

You have,

, and

.