Problem:
Dexter Company uses a standard cost system and applies manufacturing overhead cost to units of product on the basis of standard direct labor-hours (DLHs). Information on Dexter Company's manufacturing overhead costs for last period is given below:
Actual hours worked 40,000 DLHs
Standard hours allowed for actual production 38,000 DLHs
Denominator hours used in computing the predetermined overhead rate 35,000 DLHs
Predetermined overhead rate 4 per DLH
Actual overhead costs incurred 150,000
Given these data, the under- or overapplied overhead cost for the period would be:
- 8,000 underapplied
- 10,000 underapplied
- 10,000 overapplied
- 2,000 overapplied