Walter Company Uses a Job-Order Costing System to Account for Product

Multiple Choice

Walter Company uses a job-order costing system to account for product costs.The following information pertains to the current year: $\begin{array}{lr}\text { Materials placed into production } & \$ 140,000 \\\text { Indirect labour } & 40,000 \\\text { Direct labour (10,000 hours) } & 160,000 \\\text { Depreciation of factory building } & 60,000 \\\text { Other factory overhead } & 100,000 \\\text { Increase in work-in-process inventory } & 30,000\end{array}$ Factory overhead rate is $18 per direct labour hour.
What is the amount of underapplied or overapplied overhead for Walter Company in the current year?

A) $20,000 underapplied
B) $20,000 overapplied
C) $40,000 underapplied
D) $40,000 overapplied