Question

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 $282,646 and direct labor hours would be 40,378. Actual factory overhead costs incurred were $358,062, and actual direct labor hours were 53,283. What is the amount of overapplied or underapplied manufacturing overhead at the end of the year?

a.$14,919 underapplied

b.$90,335 underapplied

c.$14,919 overapplied

d.$372,981 overapplied

3 - Costs that are incurred in generating revenues during the period, but are not involved in the manufacturing process are referred to as

a.factory overhead costs

b.product costs

c.conversion costs

d.period costs

Answer 1

2.

Estimated factory overhead = $282,646

Estimated direct labor hour = 40,378

Predetermine overhead rate = Estimated factory overhead/Estimated direct labor hour

= 282,646/40,378

= $7 per direct labor hour

Actual factory overhead costs = $358,062

Actual direct labor hour = 53,283

Factory overheead applied = Actual direct labor hour x Predetermine overhead rate

= 53,283 x 7

= $372,981

Overhead applied = Factory overheead applied - Actual factory overhead costs

= 372,981 - 358,062

= $14,919

Correct option is (c)

3.

Costs that are incurred in generating revenues during the period, but are not involved in the manufacturing process are referred to as period costs.

Correct option is (d)

All post production costs i.e. selling and administrative expenses whether fixed or variable are known as period costs.

Factory overhead costs,product cost ans conversion costs are production costs.