Question
Creative Lighting, Inc., makes specialty table lamps. Manufacturing overhead is applied to production on a direct labor hours basis. During June, the first month of
Creative Lighting, Inc., makes specialty table lamps. Manufacturing overhead is applied to production on a direct labor hours basis. During June, the first month of the companys fiscal year, $57,890 of manufacturing overhead was applied to Work in Process Inventory using the predetermined overhead application rate of $6.84 per direct labor hour.
Required:
a. Calculate the number of hours of direct labor used during June. (Round your answer to the nearest whole number.)
b. Actual manufacturing overhead costs incurred during June totaled $46,100. Calculate the amount of over- or underapplied overhead for June.
c. Identify two possible explanations for the over- or underapplied overhead. (Select all that apply.)
Actual costs were less than anticipated.
More hours were worked.
Additional variable costs.
Additional fixed costs.
Allocated costs less than anticipated.
d. Whether the overapplied or underapplied overhead for the year is normally transferred to cost of goods sold in the income statement?
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