Question on Stad. costing - Overapplied and underapplied

Anil (1638 Points)

11 January 2011  

Please anyone help me solve below two questions.(Step by Step):

I have mentioned the correct answer below the questions.


1st Question:


Lee Manufacturing uses a standard cost system with overhead applied based upon direct labor hours. The manufacturing budget for the production of 5,000 units for the month of May included the following information.


Direct Labor(10000 hours at $15 per hour)  $150000

Variable overhead                                           30000

Fixed overhead                                                80000  

During May, 6,000 units were produced and the fixed overhead budget variance was $2,000 favorable. Fixed overhead during May was


  •  underapplied by $16,000. 
  •  overapplied by $18,000.
  •  overapplied by $16,000.
  •    underapplied by $2,000


Correct Answer : overapplied by $18,000.




2nd Question:



Wagner Corporation applies factory overhead based upon machine hours. At the beginning of the year, Wagner budgeted factory overhead at $250,000 and estimated that 100,000 machine hours would be used to make 50,000 units of product. During the year, the company produced 48,000 units, using 97,000 machine hours. Actual overhead for the year was $252,000. Under a standard cost system, the amount of factory overhead applied during the year was


  •  $240,000.
  •  $252,000.
  •  $250,000.
  •  $242,500.


Correct Answer : $240,000