Overapplied or Underapplied, Accounting Question?
I chose (9,900 underapplied) which was wrong and the way I came up with that answer is below...
"direct labor cost = 159,000 - 20,000 = 139,000,
applied overhead = 139,000 x 150% = 208,500,
198,600 - 208,500 = 9,900 underapplied'' <--This is how I got my answer, but when I chose that one I was marked wrong. So I need help figuring out the correct answer and the steps to get it. Thank You
This is the Question:
Bard Manufacturing uses a job order cost accounting system. During one month Bard purchased $188,000 of raw materials on credit; issued materials to production of $215,000 of which $10,000 were indirect. Bard incurred a factory payroll of $159,000, paid in cash, of which $20,000 is classified as indirect labor. Bard uses a predetermined overhead application rate of 150% of direct labor cost. If Bard incurred total overhead costs of $198,600 during the month, compute the amount of under- or overapplied overhead:
A)$9,900 overapplied.
B)$39,600 overapplied.
C)$9,900 underapplied. <---My pick was wrong.
D)$39,600 underapplied.
E)$39,900 overapplied.
