Question

ABC Manufacturing allocates overhead based on direct labor hours. You are given the following information for 2020:

Budget: Budgeted overhead $2,000, budgeted direct labor hours: 1,000
Actual: Actual overhead was $3,000, actual direct labor hours worked: 1,200
Overhead for 2020 was:_______.
a. Underapplied by $1,000
b. Underapplied by $600
c. Overapplied by $1,000
d. Overapplied by $600

Answer 1

c. Overapplied by $1,000

Step-by-step explanation:

Given that budgeted overhead is $2000 and actual overhead is $3000, overhead is overapplied or in excess(deficit) of overhead budget by $1000. If actual overhead were to be lower than budgeted overhead, overhead would be under applied or we would have a surplus of $1000(if budgeted overhead is $3000 and actual overhead is $1000 for example).