Walter Company uses a job-order costing system to account for product costs.The following information pertains to the current year: $\begin{array}{lr}
\text { Materials placed into production } & \$ 140,000 \
\text { Indirect labour } & 40,000 \
\text { Direct labour (10,000 hours) } & 160,000 \
\text { Depreciation of factory building } & 60,000 \
\text { Other factory overhead } & 100,000 \
\text { Increase in work-in-process inventory } & 30,000
\end{array}$ Factory overhead rate is $18 per direct labour hour.
What is the amount of underapplied or overapplied overhead for Walter Company in the current year?
A)$20,000 underapplied
B)$20,000 overapplied
C)$40,000 underapplied
D)$40,000 overapplied

Question

Quizplus · Accepted Answer

The applied overhead is $180,000 (10,000 hours x $18). The actual overhead is $200,000 ($40,000 + $60,000 + $100,000). The overhead is underapplied by $20,000 ($200,000 - $180,000).

Walter Company Uses a Job-Order Costing System to Account for Product