Problem: Texco Corporation uses an activity-based costing system with two activity cost pools. Texco uses direct labor hours as the measure of activity in the first activity cost pool and the number of orders in the second activity cost pool. The following information relates to these two activity cost pools for last year:
Budgeted Actual
Activity cost pool 1
Direct labor hours 120,000 145,000
manufacturing overhead cost $600,000 $580,000
Activity cost pool 2:
Number of orders 4,000 3,600
Manufacturing overhead cost 320,000 360,000
What was Texco's under- or overapplied overhead for last year?
A) $17,000 overapplied
B) $20,000 underapplied
C) $27,000 underapplied
D) $73,000 overapplied