Mango Company applies overhead based on direct labor costs.For the current year,Mango Company estimated total overhead costs to be $300,000,and direct labor costs to be $150,000.Actual overhead costs for the year totaled $330,000,and actual direct labor costs totaled $170,000.
-At year-end,Factory Overhead account is:
A)Overapplied by $10,000.
B)Overapplied by $170,000.
C)Underapplied by $10,000.
D)Overapplied by $20,000.
E)Neither overapplied nor underapplied.

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated based on the estimated costs: $300,000 / $150,000 = 2.0 (or 200%). The actual direct labor costs were $170,000, so the applied overhead would be 200% of $170,000 = $340,000. Since the actual overhead costs were $330,000, the overhead is overapplied by $10,000 ($340,000 - $330,000).

Mango Company Applies Overhead Based on Direct Labor Costs