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Derrald Company manufactures snowboards. Estimated costs for Year 1 were as follows:
Direct labor........................................................................................... $31,000
Bonuses paid to factory supervisors.................................................... 9,000
Interest expense..................................................................................... 32,000
Depreciation on manufacturing equipment..................................... 18,000
Indirect labor.......................................................................................... 11,000
Direct materials...................................................................................... 36,000
Income tax expense.............................................................................. 26,000
Indirect materials................................................................................... 14,000
Property taxes on the corporate office building............................... 18,000
Estimated direct labor hours were 40,000.
Actual data for Year 1 are as follows:
Total manufacturing overhead: $120,000
Direct labor hours: 60,000 hours
The predetermined manufacturing overhead rate is determined on the basis of direct labor hours. Which ONE of the following statements is TRUE?
Applied overhead was LESS than actual overhead by $42,000
Applied overhead was MORE than actual overhead by $68,000
Applied overhead was LESS than actual overhead by $22,000
Applied overhead was MORE than actual overhead by $52,000
Applied overhead was MORE than actual overhead by $22,000
Applied overhead was MORE than actual overhead by $42,000
Applied overhead was LESS than actual overhead by $52,000
Applied overhead was LESS than actual overhead by $68,000

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Accepted Answer

The true statement is A. Applied overhead was LESS than actual overhead by $42,000.What is the difference between applied and actual overheads?The difference between the applied overhead and the actual overhead gives rise to either overapplied or underapplied overhead.Overapplied overhead arises when applied overhead is more than actual overhead.Underapplied overhead arises when the actual overhead exceeds the applied overhead.Note that applied overhead is based on the predetermined overhead rate(s), which are estimates.Estimated Manufacturing Overhead Costs:Bonuses paid to factory supervisors $9,000Depreciation on manufacturing equipment $18,000Indirect labor $11,000Indirect materials $14,000Total estimated manufacturing overhead costs = $52,000Estimated direct labor hours = 40,000 hoursPredetermined overhead rate = $1.30 ($52,000/40,000)Actual manufacturing overhead costs = $120,000Actual direct labor hours = 60,000Applied overhead = $78,000 (60,000 x $1.30)Underapplied overhead = $42,000 ($120,000 - $78,000)Thus, the true statement about the overhead application is Option A.Learn more about overapplied and underapplied overhead at https://brainly.com/question/18558412#SPJ1