Herald Manufacturing Company uses a predetermined overhead rate to allocate fixe

Question

Herald Manufacturing Company uses a predetermined overhead rate to allocate fixed manufacturing overhead to production on a monthly basis. At the end of the accounting period it was determined that actual overhead cost was less than the estimated overhead cost and that the actual volume of production was higher than estimated. Based on this information alone:

a. The correct amount of cost was assigned to products during the accounting period.

b. Too much cost was assigned to products during the accounting period.

c. Too little cost was assigned to products during the accounting period.

d. The answer cannot be determined from the information provided.

Explanation / Answer

Solution:

Answer Con't be determined.

Because Actual overhead incurred was greater than the applied overhead there will be a debit balance representing under-applied overhead, while if the actual overhead incurred was less than the applied overhead there will be a credit balance representing over-applied overhead.

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