Mango Company applies overhead based on direct labor costs. For the current year, Mango Company estimated total overhead costs to be $300,000, and direct labor costs to be $150,000. Actual overhead costs for the year totaled $330,000, and actual direct labor costs totaled $170,000. At year-end, Factory Overhead account is:
A) Overapplied by $10,000.
B) Overapplied by $170,000.
C) Underapplied by $10,000.
D) Overapplied by $20,000.
E) Neither overapplied nor underapplied.
A) Overapplied by $10,000.
Explanation: Predetermined overhead rate = $300,000 estimated overhead cost / $150,000
estimated direct labor cost = 200%
Applied overhead = $170,000 actual direct labor cost × 200% = $340,000.
Overhead incurred, $330,000 – Overhead applied, $340,000
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