Lakeshore Company allocates overhead using direct labour-hours. For 2020, the estimated and actual labour-hours were 208,000 and 181,000 respectively, and the predetermined overhead rate used to apply overhead for the year was $25.70 per direct labour-hour. The manufacturing overhead control T-account showed a credit balance of $198,250 at the end of the year, and this balance was disposed of at the end of the year by closing it to cost of goods sold.

Required:

1. Was manufacturing overhead under- or overapplied?

multiple choice 1

• Underapplied or,

• Overapplied

2. Compute the actual overhead amount incurred over the year.

Actual Overhead

-

3. How will end-of-period disposal of this amount impact net income?

multiple choice 2

• Increase or,
• Decrease