P17.

1 Solution

Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire
extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume (54,000 units), half-
gallon cylinder that holds 2 1/2 pounds of multi-purpose dry chemical at 480 PSI. The commercial model is a
low-volume (10,200 units), two-gallon cylinder that holds 10 pounds of multi-purpose dry chemical at 390 PSI.
Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct labor hours are
96,300 or [1.5 hours × (54,000 + 10,200)]. Estimated annual manufacturing overhead is $1,584,280. Thus, the
predetermined overhead rate is $16.45 or ($1,584,280 ÷ 96,300) per direct labor hour. The direct materials cost
per unit is $18.50 for the home model and $26.50 for the commercial model. The direct labor cost is $19 per
unit for both the home and the commercial models.

The company’s managers identified six activity cost pools and related cost drivers and accumulated overhead
by cost pool as follows.

Estimated Expected Use of

Cost Estimated Use of Cost Drivers by Product
Commerci
Activity Cost Pools Drivers Overhead Drivers Home al
Receiving Pounds $ 80,400 335,000 215,000 120,000
Forming Mach. hrs 150,500 35,000 27,000 8,000
Assembling Parts 412,300 217,000 165,000 52,000
Testing Tests 51,000 25,500 15,500 10,000
Painting Gallons 52,580 5,258 3,680 1,578
Packing and shipping Pounds 837,500 335,000 215,000 120,000
$ 1,584,280

Instructions
a. Under traditional product costing, compute the total unit cost of each product. Prepare a simple
comparative schedule of the individual costs by product (similar to Illustration 4.4).
b. Under ABC, prepare a schedule showing the computations of the activity-based overhead rates (per cost
driver).
c. Prepare a schedule assigning each activity’s overhead cost pool to each product based on the use of cost
drivers. (Include a computation of overhead cost per unit, rounding to the nearest cent.)
d. Compute the total cost per unit for each product under ABC.
e. Classify each of the activities as a value-added activity or a non-value-added activity.
f. Comment on (1) the comparative overhead cost per unit for the two products under ABC, and
(2) the comparative total costs per unit under traditional costing and ABC.

NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell), into the yellow
shaded input cells.
a. Products
Commercial
Manufacturing Costs Home Model Model
Direct materials $ 18.50 $ 26.50
Direct labor 19.00 19.00
Overhead 24.68 24.68
Total unit cost $ 62.18 $ 70.18

b. Estimated Expected Use ABC

Activity Cost Pool Overhead of Cost Drivers OH Rate
Receiving $ 80,400 335,000 Pounds $ 0.24 / pound
Forming 150,500 35,000 Mach. hrs 4.30 / MH
Assembling 412,300 217,000 Parts 1.90 / part
Testing 51,000 25,500 Tests 2.00 / test
Painting 52,580 5,258 Gallons 10.00 / gallon
Packing and shipping 837,500 335,000 Pounds 2.50 / pound
$ 1,584,280

c. Home Model Commercial Model

Expected Use ABC Cost Expected Use ABC Cost
Activity Cost Pool of Drivers OH Rates Assigned of Drivers OH Rates Assigned
Receiving 215,000 $ 0.24 $ 51,600 120,000 $ 0.24 $ 28,800
Forming 27,000 4.30 116,100 8,000 4.30 34,400
Assembling 165,000 1.90 313,500 52,000 1.90 98,800
Testing 15,500 2.00 31,000 10,000 2.00 20,000
Painting 3,680 10.00 36,800 1,578 10.00 15,780
Packing and shipping 215,000 2.50 537,500 120,000 2.50 300,000
Total cost assigned $ 1,086,500 $ 497,780

Units produced 54,000 10,200

OH cost per unit $ 20.12 $ 48.80

d. Home Commercial
ABC Manufacturing Costs Model Model
Direct materials $ 18.50 $ 26.50
Direct labor 19.00 19.00
Overhead 20.12 48.80
Total cost per unit $ 57.62 $ 94.30
e. Activity Value- vs. Non-Value-Added
Receiving Non-value-added
Forming Value-added
Assembly Value-added
Testing Non-value-added
Painting Value-added
Packing and shipping Value-added

f.1 Comment on (1) the comparative overhead cost per unit for the two products under ABC, and
(2) the comparative total costs per unit under traditional costing and ABC.

Activity-based costing shows the commercial model absorbs nearly 2 1/2 times ($48.80 ÷ $20.12) as much
overhead per unit as the home model.

f.2 Comment on the comparative total costs per unit under traditional costing and ABC.

The comparison of ABC and traditional costing shows that the proper amount of overhead assigned to the
two products is not equal at $24.68 but rather $20.12 for the home model and $48.80 for the commercial
model. Under traditional costing, the margin of error on the commercial model was almost 100%, an
understatement of $24.12 on an assignment of $24.68. These distorted overhead assignments have likely
led to overpricing the home model and underpricing the commercial model.
1. True or False: The formula for computing activity based overhead rate is estimated
overhead per activity divided by Estimated use of cost drivers per activity.
-True

2. What does the time ticket indicate?

a. Employee name, hours worked, the account job to be charged and total labor cost.
b. Employee name, occupation and income amount.
c. Income determined from time worked.

3. True or False: predetermined overhead rate is based on the relationship between

estimated annual overhead costs and estimated annual operating activity, expressed in
terms of a common activity base.
a. True

4. 4. Match the definition to the term:

a. Unit Level activities: C
b. Batch level activities: A
c. Product level activities: B
d. Facility level activities: D
i. performed every time a company produces another batch of a product.
ii. performed every time a company produces a new type of product.
iii. performed for each unit of production
iv. required to support or sustain an entire production process.

5. 5. What is the primary objective of just in time processing?

a. Eliminate or reduce all manufacturing inventories
b. Identify relevant activity cost drivers
c. Identify and classify activities and allocate overhead to cost pools
d. Compute overhead rates
1. Answer: A

6. A Manhattan trucking company, Halls Trucking, provides local, short and long haul services.
Activity Cost Pools Cost Drivers Estimated Overhead Estimated Use of

Determine activity based overhead rate.

a. $0.50 per piece
b. $0.43 per mile
c. $2.67 per hour
7. ______________ is based on the relationship between estimated annual overhead costs and
estimated annual activity, expressed in terms of a common activity base. (Ch 15A)
a. Cost accounting
b. Process cost system
c. Predetermined overhead rate ✅
d. Estimated overhead rate

8. Suppose your predetermined overhead rate is 120% of direct labor and direct labor costs are
$60,000. Actual overhead incurred was $80,000. This would result in underapplication of $6,000.
(Ch 15A)
a. True
b. False ✅ (underapplied $8,000)

9. Put the steps of the Flow of Job Order Cost System in the correct order. (Ch 15A)
a. Companies first accumulate manufacturing costs in the form of raw materials, factory
labor, and manufacturing overhead.
b. They then assign manufacturing costs to the Work In Progress Inventory account.
c. When a job is completed, the company transfers the cost of the job to the Finished Goods
Inventory.
d. Later, when the goods are sold, the company transfers their cost to Cost of Goods Sold,
reported on the income statement.

(it’s in the correct order)

10. ________ activities are performed for each unit of production. The assembly of cellphones, for
example. (Ch 17)
a. Batch-level
b. Unit-level ✅
c. Facility-level
d. Product-level

11. The direct materials cost per unit is $40 for Product 1 and $30 for Product 2. The direct labor cost
is $12 per unit for each product. Find the total direct cost per unit for each product. (Ch 17)

(Product 1: $52, Product 2: $42)

12. Activity-based management extends ABC from product costing to a comprehensive management
tool that focuses on reducing costs and improving processes and decision-making.
a. True ✅
b. False

13. (F) Overhead rate is not a cost allocated to producing a product or service.

14. (C)Which of the below-cost systems is the most accurate? \

a. Traditional Costing
b. Job order costing
c. Activity-based costing
d. Process costing

15. (D) Which of the following is not an activity cost pool?

a. Manufacturing
b. Machine setup
c. Purchase ordering
d. Direct labor

16. (D) Which of the following are some of the Activity-Based Cost system’s limitations?
a. Expensive to use.
b. More complex than traditional systems.
c. Arbitrary allocations remain.
d. All of the above are correct.
e. A and D are correct.

17. (C)What is not a benefit of Just-in-Time processing?

a. Reduces or eliminates manufacturing inventories
b. Decreased or eliminated storage costs
c. Decreases the price of the product for the consumer
d. Enhances product quality

18. The estimated overhead rate is 280,000. The direct labor cost is $350,000. What is the
predetermined overhead rate? (80%)

19. AKG farms paid $25,000 in direct labor cost for the month of May. During this same month, the
farm had an income of $111,000. Under traditional costing, using 45% as the rate for applying
overhead to the job, what is the applied overhead? What is the operating income?

a. Applied OH rate= $11,250 + 25,000=36,250

b. income=111,000-36,250= $74,750
20. Which of the following is the equation for calculating predetermined overhead rate?
 a. Direct labor hours x estimated annual overhead costs = predetermined overhead rate
b. Estimated annual overhead costs / estimated annual operating activity
=predetermined overhead rate
c. Estimated overhead activity / estimated use of cost drivers
d. Direct labor hours x indirect labor hours / estimated annual overhead costs =
predetermined overhead rate

21. True or False? Costs related to manufacturing employees are accumulated in Factory
22. Labor to ensure their treatment as product costs.
i. Answer: True
ii. False

23. What are the three inventory control accounts in a job order system?
a. Raw Materials Inventory, Work in Process Inventory, and Finished Goods
24. Inventory

25. Which of the following is being described? Job Order Costing or Financial and
26. Managerial Accounting?
a. Includes activity-based costing
b. Typically more accurate
c. Includes cost pools and cost drivers
i. Job order costing
ii. Financial and Managerial accounting

27. True or False? Facility-level activities are required to support or sustain an entire production
process
i. False
ii. Answer: True
28. Which of the following DOES NOT fall under the Process Cost System
a. Used to allocate cost for large batches of similar
product.
b. Costs are accumulated for a time period
c. Costs are assigned to departments or processes for a
specified period of time
d. Costs are assigned to each job or batch

29. True or False: A Job Order Cost system has a job or batch that has its own characteristics that
makes it distinguishable
30. Create a condensed cost of goods manufactured sheet based off the following information for
Waggoner Reality for August 31st, 2022:
a. August 1st inventories – finished goods were $18,500, work in process was $22,450, and
raw materials were $14,200
b. August 31st inventories – finished goods were $11,700, work in process was $30,100, and
raw materials was $8,900
c. Additions to work in process inventory were: direct materials were $80,400, direct labor
$45,000 and MOH applied $32,700
 Waggoner Reality Company
Costs of Goods Manufactured Schedule
For the Month Ended August 31st, 2022

Work in process inventory, August 1st …………… $22,450

Direct materials used… $80,400
Direct labor… $45,000
Manufactured Overhead Applied… $32,7000
Total Manufacturing Costs… $158,100
Total Cost of Work in Process… $180,550
Less: Work in process inventory, August 31st… ($30,100)
Costs of Goods Manufactured… $150,450
31. True or False: Anything labor related would be an example of a unit-level activity

32. Match the following terms:

a. Activity (II)
b. Activity Cost Pool (III)
c. Cost Driver (I)
i. Any factor or activity that has a direct cause-effect
relationship with the resources consumed.
ii. Any event, action, transaction, or work sequence that
incurs costs when producing a product or performing a service.
iii. The overhead cost attributed to a distinct
activity (e.g., ordering materials or setting up machines).

33. Put the 4 steps of Activity-Based Costing in the correct order:

a. Assign overhead costs to products using the overhead rates
determined for each cost pool and each product’s use of each
cost driver.
b. Identify and classify the activities involved in the manufacture
of specific products and assign overhead to cost pools.
c. Identify the cost driver that has a strong correlation to the costs
accumulated in each cost pool and estimate total annual cost
driver usage.
d. Compute the activity-based overhead rate for each cost pool
(amounts in Step 1 divided by amounts in Step 2).
Answer:
Identify and classify the activities involved in the manufacture
of specific products and assign overhead to cost pools.
Identify the cost driver that has a strong correlation to the costs
accumulated in each cost pool and estimate total annual cost
driver usage.
Compute the activity-based overhead rate for each cost pool
(amounts in Step 1 divided by amounts in Step 2).
Assign overhead costs to products using the overhead rates
determined for each cost pool and each product’s use of each
cost driver.

34. For Munsto company, they determined their predetermined overhead rate for labor is 150%.
During the month the company incurred $156,500 of factory labor costs, actual overhead was
calculated to be $233,600.
a. Compute the amount of manufacturing overhead applied during the month
i. $234,750
b. Determine the amount of under or over applied manufacturing overhead
i. Overapplied by $1,150
35. Activity based costing is a more complex cost analysis
a. True / False
36. What two cost systems are in the job order costing system:
a. Process costing
b. Job order costing
c. Activity based costing
d. Transaction costing
37. Calculate the predetermined overhead rate for the Easier company. During the month of May the
company incurs an overhead of $243,300 and their labor for the month came out to be 2,350.
a. What is the predetermined overhead rate for the month of May
i. $103.53
38. Activity based costing allocates overhead to multiple activity job pools.
a. True / False
39. Traditional costing is used for only one type of product?
a. True / False
40. What is a job cost sheet
a. A sheet to keep track of manufacturing costs
b. A balance sheets
c. Bank statements
d. payroll
41. True/False -- In a job order cost system, jobs are measured for each completed job rather than for
set time periods.
42. All of the below would be examples of job order cost systems except:
a. Construction of a house
 b. Filming of a movie
c. Production of a jet
d. Owning a lemonade stand
43. During the first two months of 2022, Lisa’s Lemonade Company incurred the following direct
labor costs: January $5,000 and February $6,000. Estimated overhead for the 2 months,
respectively, totaled $4,000 and $8,000. Actual overhead for the 2 months, respectively, totaled
$6,500 and $7,500.
a. Solve for the predetermined overhead rate for each month.
i. January = 80%
ii. February = 133%
44. Technology inc. manufactures two products: radios and walkie talkies. During June, 20 radios
and 100 walkie talkies were produced, and overhead costs of $30,500 were estimated. An
analysis of estimated overhead costs reveals the following activities.

Activities Cost Drivers Total Cost

Materials Handling Number of Requisitions $15,250

Machine Setups Number of Setups $7,095

Quality Inspections Number of Inspections $8,155

$30,500

45. The cost driver volume for each product was as follows.

Cost Drivers Radios Walkie Talkies Total Cost

Number of 300 450 750

Requisitions
 Number of Setups 140 200 340

Number of 120 320 440

Inspections

Determine the overhead rate for each activity:

Activity Cost Estimated Expected use of Activity based OH

Pools Overhead cost driver/ rates
activity

Material Handling $15,250 750 20.33

Machine Setups $7,095 340 20.87

Quality $8,155 440 18.53

Inspections

46. Activity based costing is an approach for

a. Allocating overhead costs
b. Work sequence cost
c. Cost effective relationship
47. What is the activity cost pool?
a. Any event, action, transaction, or work sequence that incurs cost when producing a
product or performing a service
b. The overhead cost attributed to a distinct activity
c. The sum of costs for the DL, DM, and MOH for an event or service to be produced
48. What are the four activity levels?
a. Unit based activities
b. Batch based activities
c. Product level activities
d. Facility level activities
49. What is cost accounting?
a. Measuring, recording and reporting of product cost total cost and unit cost are determined
from accumulated data.
50. What is Cost Accounting Systems?
a. Consists of accounts of various manufacturing costs
51. What are Process cost systems?
a. Used when producing large amounts of similar products
52. T/F Activity-Based costing is less accurate than Traditional costing.
a. False
53. What are the four steps for activity-based costing
a. Identify and classify the activities, Identify the cost driver, Compute the activity-based
overhead rate, Assign overhead costs to products.
54. Find the manufacturing overhead applied if the predetermined overhead rate is 120% of direct
overhead cost. Direct labor cost for the month was $96,000.
a. $115,200
55. Estimated Manufacturing Overhead/Estimated usage

56. A Job Cost Sheet is

a. A form used to record the cost chargeable to a specific job cost
b. A cost accounting system is used when a company manufactures a large volume
57. of similar products.
a. A document that indicates the employee, the hours worked, the account and job
58. to be charged, and the total labor cost.
a. A document authorizing the issuance of raw materials from the storeroom to
59. production.

60. (T/F) When over or under-applied, adjustments need to be made to the cost of goods sold

61. Multiple cost drivers are used in what type of costing

a. Activity Based Costing
b. Traditional costing

62. Traditional costing is generally more accurate than activity-based costing

a. True
b. False

63. Which of the following is NOT a step in activity based costing

a. Identify and classify the activities
b. Identify the cost driver
c. Calculate the pre-determined overhead rate
d. Compute the activity-based overhead rate
e. Assign overhead costs to products

64. A costing system that allocates overhead to multiple activity cost pools and assigns the activity cost
pools to products or services by means of cost drivers.
 a. Activity-based costing (ABC)
b. Traditional based

65. What is a cost driver?

a. Activities performed in support of an entire product line but not always performed every time
a new unit or batch of products is produced.
b. Activities performed for each unit of production.
c. Any factor or activity that has a direct cause-effect relationship with the resources consumed.

66. The overhead rate for machine setups is $100 per setup. Products A and B have 80 and 60 setups,
respectively. The overhead assigned to each product is:

a. Product A $8,000, Product B $8,000.

b. Product A $8,000, Product B $6,000.
c. Product A $6,000, Product B $6,000.
d. Product A $6,000, Product B $8,000.

67. (T/F): The three main benefits of activity-based costing are...

1.More cost pools therefore more accurate product costing
2.Enhanced control over overhead costs
3.Supports better management decisions

68. (T/F) A job cost sheet is: A form used to record the costs chargeable to a specific job and to
determine the total and unit costs of the completed job.
69. In Crawford Company, the predetermined overhead rate is 80% of direct labor cost. During the month,
Crawford incurs $210,000 of factory labor costs, of which $180,000 is direct labor and $30,000 is
indirect labor. Actual overhead incurred was $200,000. The amount of overhead added to Work in
Process Inventory should be:

a. $200,000.
b. $144,000.
c. $168,000.
d. $160,000.
70. The formula for computing the predetermined manufacturing overhead rate is estimated annual
overhead costs divided by estimated annual operating activity, expressed as:

a. direct labor cost.

b. direct labor hours.
c. machine hours.
d. Any of the answer choices is correct.

71. What are the two types of cost accounting?

a. Profit cost system
b. Process cost system
c. Job order cost system
d. Accounting cost system

72. True or False: To determine the predetermined overhead rate, you take your estimated
overhead divided by your estimated usage.
a. True

73. When assigning costs to finished goods, what inventory increases and/or decreases?
a. Decrease finished goods inventory and increase WIP inventory
b. Increase finished goods inventory and increase WIP inventory
c. Decrease finished goods inventory and decrease WIP inventory
d. Increase finished goods inventory and decrease WIP inventory

74. True or False: Underapplied overhead decreases COGS.

a. False

75. Any factor or activity that has a direct cause-effect relationship with the resources
consumed
a. Cost pool
b. Cost driver
c. Activity
d. Overhead costs
76. Calculate the predetermined overhead rate: Estimate production of 300,000 units of
screws and 60,000 units of nails. Estimated use of cost drivers per activity is 3,200
orders.

ANS: $300,000/3,200 = $93.75 per order

77. How do you calculate a predetermined overhead rate?

a. Underapplied overhead / underapplied overhead
b. Cost / labor hours
c. Estimated annual overhead cost / estimated annual operating activity
d. None of the above
78. True or False : activity based costing requires multiple cost drivers
a. True
79. Which of the following is NOT true of job order costing?
a. Costs are assigned to each job or batch
b. Each job has its own distinguished characteristics
c. You must compute each cost per job
d. It is used to allocate cost for large batches of similar products - (not true because
this is process cost system)
80. True or False : When overhead is overapplied it decreases the cost of goods sold
a. True
81. Cats Mowing assigns overhead based on labor hours. The company's estimated overhead
cost for the year was $200,000. The total estimated direct labor hours for the company
was 2,000. Calculate the predetermined overhead rate under traditional costing per labor
hour.
a. 2000,000 / 2,000 = $100 per hour
82. What would be the cost driver of training all employees of the company?
a. Number of employees
b. Machine hours / Direct labor hours
c. Inventory
d. Number of orders processed
83. Match the following terms with their definitions
a. Activity
b. Activity cost pool
c. Cost driver

84. Any factor or activity that has a direct cause-effect relationship with the resources
consumed - C
85. Any event, action, transaction, or work sequences that incurs cost when producing a
product or performing a service - A
86. The overhead cost attributed to a distinct activity - B

87. Cats Mowing has identified inspections as an activity cost pool to which it has allocated
estimated overhead of $1,500,000. It has estimated use of cost drivers for that activity to
be 120,000 inspections. Mowers require 30,000 inspections, Leaf blowers 20,000, and
Weed Eaters 70,000. The overhead assigned to each product is:
a. 1,500,000 / 120,000 = 12.5

i. Mowers - 12.5 x 30,000 = $375,000

ii. Leaf Blowers - 12.5 x 20,000 = $250,000
iii. Weed Esters - 12.5 x 70,000 = $875,000

88. For Karr Company, the predetermined overhead rate is 140% of direct labor cost. During
the month, Karr incurred $90,000 of factory labor costs, of which $80,000 is direct laborand
$10,000 is indirect labor. Actual overhead incurred (including indirect labor) was$119,000.
Compute the amount of manufacturing overhead applied during the month. Determine the
amount of under- or overapplied manufacturing overhead.
ANSWER: Manufacturing overhead applied = (140% × $80,000) = $112,000
Underapplied manufacturing overhead = ($119,000 − $112,000) = $7,000

89. A company is more likely to use a job order cost system if?
i. It manufactures a large volume of similar products.
ii. its production is continuous.
iii. It manufactures products with unique characteristics.
iv. It uses a periodic inventory system.
90. ANSWER: C

91. When incurred, factory labor costs are added to:

i. Work in Process.
ii. Factory Wages Expense.
iii. Factory Labor.
iv. Finished Goods.
92. ANSWER: C
93. (T/F) In our coverage of job order costing and process costing, we used a single or
plantwide overhead rate throughout the year for the entire factory operation. That rate
was called the predetermined overhead rate.
ANSWER: True

94. (T/F) For job order costing, we assumed that direct labor (cost or hours) was the relevant
activity base for assigning all direct labor costs to jobs.
ANSWER: False- Overhead costs

95. (T/F) An overhead cost allocation method that uses multiple bases is activity-based
costing.
ANSWER: True

96. A company using traditional costing applies overhead based on labor costs. Overhead costs are
estimated to total $500,000 for the year and direct labor costs are estimated to $750,000. Compute
the predetermined overhead rate for the year.

Answer: $500,000/$750,000 = 66.7%

97. Manufacturing overhead is overapplied if:

a. Actual overhead is less than applied
b. Actual overhead is greater than applied
c. The predetermined rate equals the actual rate
d. Actual overhead equals applied overhead

98. True or False: If a company underapplied their overhead, their costs of goods sold would
increase.

99. A company using activity-based costing has multiple cost pools, one being Designing. The cost
driver for this cost pool is designer hours. The company’s estimated overhead for this cost pool is
$200,000. Their estimated use of this cost driver is 5,000 design hours. What is the activity based
overhead rate for this cost pool?
a. 1,000
b. 500
c. 40
d. 2.5

100. True or False: Activity-based costing is more accurate than traditional costing.

101. Which of these is not a benefit of activity-based costing:

a. More accurate than traditional costing
b. Better able to control overhead costs
c. Lowers prices
 d. Supports better management

102. What are two types of Cost Accounting?

a. order cost system and allocated cost system
b. job order cost system and process cost system
c. labor cost system and cost of goods system
d. none of the above

103. Match the Activity Costs Pool with the correct Cost Drivers
_C.__ Administration
_D. Machine Setups
_B. Inspecting and Testing
_A_ Factory maintenance
a. Square Footage
b. Number of Inspections
c. Number of Partner Hours
d. Number of Setups

104. Number the Steps for Activity-Based Costing

_3.__ Compute the activity-based overhead rate for each cost pool
_1.__ Identify and classify the activities involved in the manufacture of specific products and
assign overhead to costs pools
_4.__ Assign overhead costs to products using the overhead rates determined for each cost
pool and each product’s use of each cost driver
_2.__ Identify the cost driver that has a strong correlation to the costs accumulated in each
costs pool and estimate total annual cost driver usage

105. Jack’s pumpkin lanterns inc. Has a predetermined rate of 73% of direct labor
hours. They incurred 14,000 hours of factory labor 2,000 hours was indirect and 12,000
was direct labor.

Compute the amount of manufacturing overhead applied during the month.

Overhead applied: _$8,760 per hour__ (73% x 12,000)

The actual overhead was $10,264 per direct labor hour. Was the manufacturing
overhead over or under applied?

___Underapplied by 1509____