Beaver Company used a predetermined overhead rate last year of $2 per direct labour hour based on an estimate of 25,000 direct labour hours to be worked during the year.Actual costs and activity during the year were:
What was the under- or overapplied overhead last year?
A) $1,000 underapplied.
B) $1,000 overapplied.
C) $2,000 underapplied.
D) $3,000 overapplieD. (24,000@ $2)- 47,000 = $1,000 overapplied

Question

Beaver Company used a predetermined overhead rate last year of $2 per direct labour hour based on an estimate of 25,000 direct labour hours to be worked during the year.Actual costs and activity during the year were: 
What was the under- or overapplied overhead last year?
A) $1,000 underapplied. 
B) $1,000 overapplied. 
C) $2,000 underapplied. 
D) $3,000 overapplieD. (24,000@ $2)- 47,000 = $1,000 overapplied

Quizplus · Accepted Answer

Based on the actual costs and activity during the year, the overhead applied was $46,000 (23,000 direct labor hours x $2 predetermined rate). However, the actual overhead incurred was only $45,000. This means that $1,000 was overapplied (applied more overhead than was actually incurred). Therefore, the correct answer is B) $1,000 overapplied.

Beaver Company Used a Predetermined Overhead Rate Last Year of $2