6 . Freeman Company uses a predetermined overhead rate based on direct-labor hou

Question

6. Freeman Company uses a predetermined overhead rate based on direct-labor hours to apply manufacturing overhead to jobs. At the beginning of the year, the company estimated manufacturing overhead would be $150,000 and direct-labor hours would be 10,000. The actual figures for the year were $186,000 for manufacturing overhead and 12,000 direct-labor hours. The cost records for the year will show      A. overapplied overhead of $30,000. B. underapplied overhead of $30,000. C. overapplied overhead of $6,000. D. underapplied overhead of $6,000. 6. Freeman Company uses a predetermined overhead rate based on direct-labor hours to apply manufacturing overhead to jobs. At the beginning of the year, the company estimated manufacturing overhead would be $150,000 and direct-labor hours would be 10,000. The actual figures for the year were $186,000 for manufacturing overhead and 12,000 direct-labor hours. The cost records for the year will show
6. Freeman Company uses a predetermined overhead rate based on direct-labor hours to apply manufacturing overhead to jobs. At the beginning of the year, the company estimated manufacturing overhead would be $150,000 and direct-labor hours would be 10,000. The actual figures for the year were $186,000 for manufacturing overhead and 12,000 direct-labor hours. The cost records for the year will show      A. overapplied overhead of $30,000. B. underapplied overhead of $30,000. C. overapplied overhead of $6,000. D. underapplied overhead of $6,000.

Explanation / Answer

$150,000/10,000 direct labor hours = $15 per direct labor hour. 12,000 direct labor hours * $15 per direct labor hour = $180,000. $180,000 applied - $186,000 actual = Underapplied of $6,000. Answer: D, Underapplied overhead of $6,000

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