(solution) Avery Co. uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead

(solution) Avery Co. uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead

Avery Co. uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. For the month of October, Avery’s estimated manufacturing overhead cost was $300,000 based on an estimated activity level of 100,000 direct labor-hours. Actual overhead amounted to $325,000 with actual direct labor-hours totaling 110,000 for the month. How much was the overapplied or underapplied overhead? A) $25,000 overapplied B) $25,000 underapplied C) $5,000 overapplied D) $5,000 underapplied