Actual overhead for the month is $41,250. Overhead applied to jobs is $38,900. What adjustment is indicated?
Correct Answer
A) $2,350 underapplied
Actual overhead exceeds applied overhead by $2,350, so overhead is underapplied.
Why This Is the Correct Answer
Actual overhead exceeds applied overhead by $2,350, so overhead is underapplied.
Why the Other Options Are Wrong
Option B: $2,350 overapplied
$2,350 overapplied is not aligned with the supported result for underapplied overhead; it has the wrong label or classification even if the number looks close.
Option C: $80,150 underapplied
$80,150 underapplied is above the supported result for underapplied overhead; it likely adds an unsupported amount or compares the wrong financial base.
Option D: $80,150 overapplied
$80,150 overapplied is above the supported result for underapplied overhead; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Controller Closes money test: bucket before math for the controlling choice overhead.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Two, Accounting for Costs and Expenses, Accounting for Overhead; use the job ledger figures in the stem and recompute the same accounting measure.
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