Managerial accounting What is the amount of overapplied or underapplied manufacturing overhead at the end of ?

Question

A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be $360,000 and direct labor hours would be 45,000. Actual factory overhead costs incurred were $377,200, and actual direct labor hours were 46,000. What is the amount of overapplied or underapplied manufacturing overhead at the end of the year?

a.        $17,000 overapplied

b.        $17,000 underapplied

c.        $9,200 overapplied

d.        $9,200 underapplied

Please help! I know that it has to be either b) or d).

Answer 1

Predetermined Overhead Rate = $360,000 / 45,000 hrs = $8 per labor hour

Applied Overhead = 46,000 hrs * $8 per hour = $368,000

Actual Overhead = $377,200

Underapplied Overhead = $377,200 - $368,000 = $9,200