Martinez Manufacturing Applies Overhead Based on Direct Labor Hours

Martinez Manufacturing applies overhead based on direct labor hours. The company estimates that their overhead for the year will be $180,000, and that they will use 72,000 direct labor hours. During the year, Martinez Manufacturing actually used 71,000 direct labor hours and actual overhead costs were $184,000. At the end of the year, manufacturing overhead was:

A) Overapplied by $6,500.
B) Overapplied by $4,000.
C) Underapplied by $4,000.
D) Underapplied by $6,500.

Correct Answer:

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