COST ACCOUNTING
MANUFACTURING OVERHEAD
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the actual overhead incurred is less than the overhead that has been charged to production.
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actual overheads have fallen in relation to what they were expected to be.
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the overhead charged to production is lower than the actual overhead incurred
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the overhead charged to production is greater than the actual overhead incurred
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Detailed explanation-1: -Underapplied overhead occurs when a business doesn’t budget enough for its overhead costs. This means the budgeted amount is less than the amount the business actually spends on its operations.
Detailed explanation-2: -Answer and Explanation: If overhead applied is less than actual overhead incurred, it is: b. Underapplied. If actual overhead incurred during an accounting period is greater than the amount of overhead applied to a job, this means overhead was underapplied to that particular job.
Detailed explanation-3: -Underapplied overhead occurs when the amount in overhead expenses exceeds what a company budgets to maintain its operations. Companies record underapplied overhead on the balance sheet as a prepaid expense and then debit the cost of goods sold (COGS) against this amount at the end of the year.
Detailed explanation-4: -Over applied Overhead. Overhead that occurs when the applied overhead is greater than the actual overhead. Overhead Variance. Difference between applied overhead and actual overhead.
Detailed explanation-5: -In short, the main difference between the two concepts is that actual overhead is the amount of cost actually incurred, while applied overhead is the standard amount of overhead applied to cost objects. Given this difference, the two figures are rarely the same in any given year.