Using normal costing, a manufacturer applies $3 ro each finished unit to represe

Question

Using normal costing, a manufacturer applies $3 ro each finished unit to represent the cost of overhead, based on the budget for overhead and the anticpated amount of production, at the end of the year, the manufacturer discovers that uunits produced were highter the number anticipated and that the factory overhead has been underapplied. Which statement is True?

A. Actual factory overhead was greater than actual amount applied.

b. Budgeted factory overhead was greater than actual factory overhead

c. Budgeted factory overhead was greater than the amount applied

d. Actual factory overhead was less than the amount applied

Explanation / Answer

Answer is A. Actual Factory overheads was greater than Actual amount applied.

Explanation:

Overheads applied is lesser than actual overheads incurred due to the fact that the factory overheads has been under-applied. This situation arises only in case when the actual factory overheads are greater than actual overheads applied.

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