Acme Company uses an allocation rate of $25 per direct labor hour to allocate overhead. At the beginning of the year, Acme estimated that their overhead expenses would be $100,000. At the end of the year, actual overhead was $105,000 and Acme actually used 4,100 direct labor hours.

Based on this information, which of the following is true?

Select one:

a.

Acme's overhead account had a debit balance before correcting for the misallocated overhead.

b.

Before correcting the misallocation, Acme's gross profit was lower than it should have been.

c.

Acme's overhead was overallocated for the year.

d.

Before correcting the misallocation, Acme's cost of goods sold was higher than it should have been.