Adams Manufacturing Allocates Overhead to Production on the Basis of Direct

Adams Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Adams estimated total overhead of $396,000; materials of $410,000 and direct labor of $220,000. During the year Adams incurred $418,000 in materials costs, $413,200 in overhead costs and $224,000 in direct labor costs.
-Compute the amount of under- or overapplied overhead for the year.

A) $17,200 underapplied.
B) $4,800 underapplied.
C) $10,000 underapplied.
D) $10,000 overapplied.
E) $17,200 overapplied.

Correct Answer:

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