The Clearwater overhead account shows $186,400 applied to jobs and $198,750 actual overhead incurred. What overhead status should be reported?
Correct Answer
A) $12,350 underapplied
Compare actual overhead with overhead applied to jobs; actual greater than applied is underapplied, and applied greater than actual is overapplied.
Why This Is the Correct Answer
Compare actual overhead with overhead applied to jobs; actual greater than applied is underapplied, and applied greater than actual is overapplied.
Why the Other Options Are Wrong
Option B: $12,350 overapplied
$12,350 overapplied is not aligned with the supported result for under/overapplied overhead; it has the wrong label or classification even if the number looks close.
Option C: $186,400
$186,400 is above the supported result for under/overapplied overhead; it likely adds an unsupported amount or compares the wrong financial base.
Option D: $198,750
$198,750 is above the supported result for under/overapplied overhead; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Controller Closes money test: bucket before math for under overapplied.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Three, Job Cost Accounting, Overhead Application; use the job ledger figures in the stem and recompute the same accounting measure.
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