Media, Inc., an advertising agency, applies overhead to jobs on the basis of dir
ID: 2445077 • Letter: M
Question
Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor hours. Overhead was estimated to be $209,000, direct professional labor hours were estimated to be 19,000, and direct professional labor cost was projected to be $323,000. During the year, Media incurred actual overhead costs of $205,700, actual direct professional labor hours of 18,500, and actual direct labor cost of $236,000. By year-end, the firm's overhead was:
A) $2,000 overapplied
B) $5,500 underapplied
C) $3,300 overapplied
D) $2,200 underapplied
E) $3,300 underapplied
Explanation / Answer
Budgeted Actual
Direct Professional Labor Hours $19000 $18500
Over Head $209000 $205700
Labor Cost $323000 $236000
Variance of Over head = $209000-$205700
= $3300 Under Applied