Question

Killian Corporation began operations on January 1. The predetermined overhead rate was set at $6.00 per direct labor-hour. Debits to Work in Process for the year totaled $550,000. Credits to Work in Process totaled $480,000. Analysis of the Corporation's records indicate that direct labor cost totaled $250,000 for the year, which represents 20,000 direct labor-hours. If the actual manufacturing overhead cost for the year totaled $145,000, then overhead was: overapplied by $25,000 overapplied by $10,000 underapplied by $25,000 underapplied by $10,000

Answer 1

underapplied by 25,000

Step-by-step explanation:

20,000 direct labor x 6$ overhead rate = 120,000 applied overhead

actual overhead 145,000

underapplied by 25,000

Reasoning:

If applied is lower than actual overhead it is underapplied.

We active cost for 120,000 when it should be for 145,000

If applied is higher than actual overhead it is overapplied.

We active cost for 120,000 when it should be for 100,000