Allen, Inc. has budgeted $120,000 in variable overhead and $72,000 in fixed overhead for the current month. 8,000 custom units were expected to be produced using 60,000 machine hours. During the month, Allen actually used 68,096 machine hours and produced 8,960 units. Actual overhead costs were: $132,000 variable and $73,600 fixed.
Assume Allen uses an actual costing system. The amount of over- or underapplied overhead for the current month is:
A) $9,440 overapplied
B) $12,307 overapplied
C) $0
D) $13,600 overapplied

Question

Quizplus · Accepted Answer

In an actual costing system, overhead is applied based on actual costs incurred. Since the actual overhead costs are used, there is no over- or underapplied overhead.