Assume that at the beginning of the year a firm estimates its overhead costs at $100,000. The firm plans to use job order costing and will use direct labor hours as its base. Direct labor hours for the year were estimated at 50,000. At the end of the year, the firm was under allocated by %5,000 based on $2,000 actual direct labor hours.

1. What is the firms actual overhead cost?

1. $96,000
2. $99,000
3. $100,000
4. $104,000
5. $109,000

2. Which of the following best describes why overhead was under-allocated its this case?

1. The firm worked more direct labor than anticipated and these allocated too frequently.
2. The firms overhead was more than expected and the amount allocated with each direct labor hours too much
3. The firm worked more direct labor than anticipated and the amount allocated too frequently..
4. The firms overhead was more than expected and the amount allocated with each direct labor was too low
5. The firm worked more direct labor that than anticipated and allocated frequently and the firm overhead was more than expected the amount allocated with each direct labor hour was too low.