Harrell Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs.At the beginning of the year,the company estimated its total manufacturing overhead cost at $400,000 and its direct labour hours at 100,000 hours.The actual overhead cost incurred during the year was $350,000 and the actual direct labour hours incurred on jobs during the year was 90,000 hours.What would be the manufacturing overhead for the year?
A) $10,000 underapplied.
B) $10,000 overapplied.
C) $50,000 underapplied.
D) $50,000 overapplieD.
Rate = $400,000/100,000 hrs.= $4/hr.Actual OH = $350,000 therefore overapplied by $10,000

Question

Quizplus · Accepted Answer

The actual overhead cost incurred is less than the estimated overhead cost, therefore the overhead is overapplied by the difference ($400,000 - $350,000 = $50,000). This means that the predetermined overhead rate was set too high and resulted in more overhead being applied to jobs than was actually incurred. Therefore, choice B is the best answer.

Harrell Company Uses a Predetermined Overhead Rate Based on Direct