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Manufacturing Overhead - Silo's Company

Silo's Company uses a predeterminated overhead rate based on labor-hours to apply manufacturing overhead to jobs. Estimate and actual data for direct labor and manufacturing overhead for last year are as follows:

Estimated Actual
Direct Labor Hours.............600,000 550,000
Manufacturing overhead .......$720,000 $680,000

The manufacturing overhead for Silo's Company for last year was:

a) underapplied by $40,000
b) overapplied by $20,000
c) overapplied by $40,000
d) underapplied by $20,000

Solution Preview

As the estimated overhead are more than the actual overhead, thus there is over applied overhead by 720000-680000= $40000
Hence answer is:
c) ...

Solution Summary

A choice is picked with brief explanation for the manufacturing overhead of a company.