Question

Which of the following statements is true regarding applied overhead?

a. It is equal to the product of the overhead rate and budgeted annual usage of the unit-level drivers.
b. It is disposed of by assigning it to cost of goods sold, if it is equal to actual overhead.
c. It is the total overhead assigned to actual production at any point in time.
d. It is calculated to determine whether the actual overhead is material or not.

Answer 1

The true statement regarding applied overhead is that it is the total overhead assigned to actual production at any point in time.

Step-by-step explanation:

The statement that is true regarding applied overhead is c. It is the total overhead assigned to actual production at any point in time.

Applied overhead refers to the actual overhead costs that are allocated to a specific production job or process. It is calculated by multiplying the overhead rate by the actual usage of the unit-level drivers, such as machine hours or labor hours, for the specific job or process. The allocated overhead costs are considered applied overhead.

For example, if a company has a predetermined overhead rate of $5 per machine hour and a specific job requires 10 machine hours, then the applied overhead for that job would be $50.