Clear Colors Corporation Uses a Predetermined Overhead Rate Based on Direct

Multiple Choice

Clear Colors Corporation uses a predetermined overhead rate based on direct labor costs to apply manufacturing overhead to jobs. At the beginning of the year the Corporation estimated its total manufacturing overhead cost at $350,000 and its direct labor costs at $200,000. The actual overhead cost incurred during the year was $362,000 and the actual direct labor costs incurred on jobs during the year was $208,000. The manufacturing overhead for the year would be:

A) $12,000 underapplied.
B) $12,000 overapplied.
C) $2,000 underapplied.
D) $2,000 overapplieD.Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $350,000 ÷ $200,000 = 1.75