ECONOMICS

COST ACCOUNTING

MANUFACTURING OVERHEAD

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
The amount by which the overhead applied to jobs during a period exceeds the overhead incurred during the period is known as:
A
Predetermined Overhead
B
Undetermined Overhead
C
Overapplied Overhead
D
Underapplied Overhead
Explanation: 

Detailed explanation-1: -If the total overhead incurred during the period is greater than the overhead applied to jobs during the period, then the amount by which the overhead applied to jobs exceeds the overhead incurred during the period is known as adjusted overhead.

Detailed explanation-2: -The amount by which the overhead applied to jobs during a period exceeds the overhead incurred during the period is known as: Overapplied overhead.

Detailed explanation-3: -This is the rate applied to each dollar of direct labor spent on work in progress. For example, if a product took 2 hours to make, the amount of overhead applied to work in progress would be $36 (2 hours x $12 = $24 x 150 percent = $36 labor overhead).

Detailed explanation-4: -Overapplied overhead occurs when expenses incurred are actually less than what a company accounts for in its budget. This means that a company comes in under budget and achieves a lower amount of overhead costs during the accounting period.

Detailed explanation-5: -The difference between the overhead cost applied to work in process (WIP) and the actual overhead costs of a period is termed as either underapplied overhead or overapplied overhead. For example if a company calculates its predetermined overhead rate $6 per machine hour.

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