Can someone please help me with the following problem.
-The Marcos company budgeted overhead at $240,000 for the period, based on a budgeted volume of 60,000 direct labor hours. At the end of the period, the factory overhead account had a debit balance of $260,000; actual direct labor hours were 63,000. What was overhead for the period?
A. 12,000 overapplied
B. 8,000 overapplied
C. 8,000 underapplied
D.12,000 underapplied

I know the answer has to be underapplied because there was a debit balance and because the actual factory overhead expenses were more than budgeted for the operating level achieved. Which means the answer has to be either C. or D.

SSchultz0956

I think it's letter (d) because each hour of labor is worth 4 dollars and since they were over by 3000 hours they underapplied on 12000 dollars. I'm not positive this is correct though, so i'd double check it. The 26000 dollars let you know it's underapplied because it's a debit, and the 63000 tells you the unbedgeted hours of labor used, the 240000 and 60000 let you find the cost of labor per hour. This way you see why they stated these terms.