Question

1. Accounting is an information system that provides essential data about the economic activities of an entity to various users to aid them in making informed judgments and decisions.

True

False

2. 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 47,000. What is the amount of overapplied or underapplied manufacturing overhead at the end of the year?

$16,000 overapplied.

$16,000 underapplied.

$1,200 overapplied.

$1,200 underapplied.

Answer 1

1. True

Explanation - Accounting provides essential data related to economic activities of Business Firm, like Profit loss Accounts, Balance sheets, Cash flows, Fund Flow etc. It gives various users an insight of entities economic health condition and enable them to make judgments and decisions.

2.
Predetermined Overhead Rate = budgeted factory overhead costs / budgeted direct labor hours
= $ 360,000 / 45,000
= $8 per hour
Overhead Applied = Total Actual direct labor hours x Predetermined Overhead Rate
   = 47,000 x $8
   = $376,000
Amount of overapplied or underapplied manufacturing overhead at the end of the year

= overhead costs incurred - Overhead Applied
= $377,200 - $376,000
= $1200 underapplied

$1,200 underapplied is right answer