Actual overhead is $67,200 and overhead applied to jobs is $63,450. What adjustment is indicated?
Correct Answer
B) $3,750 underapplied
Actual overhead exceeds applied overhead by $3,750, so overhead is underapplied.
Why This Is the Correct Answer
Actual overhead exceeds applied overhead by $3,750, so overhead is underapplied.
Why the Other Options Are Wrong
Option A: $3,750 overapplied
$3,750 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: $130,650 overapplied
$130,650 overapplied is above the supported result for underapplied overhead; it likely adds an unsupported amount or compares the wrong financial base.
Option D: $130,650 underapplied
$130,650 underapplied 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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