Question

The Davis Corporation budgeted factory overhead at $250,000 for the period for the Assembly department, based on a budgeted volume of 100,000 direct labor hours. At the end of the period, the factory overhead control account for the Assembly department had a balance of $252,000. The actual (and allowed) direct labor hours were 104,000. What was the over- or underapplied factory overhead for the period?

A. $8,000 overapplied
B. $10,000 underapplied
C. $10,000 overapplied
D. $8,000 underapplied

Answer 1

B. $10,000 Underapplied

Step-by-step explanation:

Hourly rate = $250,000/100,000 = $2.5 per hour

Excess hours = 4000

Excess over head = 4000 * 2.5 = $10,000

There was a $10,000 underapplied overhead for that period