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Babel Ltd uses predetermined overhead rates based on labor hours. The monthly budgeted overhead is $400,000 and the budgeted labor hours were 50,000. During the month the company worked a total of 80,000 labor hours and actual overheads totaled $600,000. The overhead at the end of the month would therefore be: A. $40,000 over-applied B. $40,000 under-applied C. $60,000 under-applied D. $20,000 over-applied E. None of the above.

Babel Ltd uses predetermined overhead rates based on labor hours. The monthly budgeted overhead is $400,000 and the budgeted labor hours were 50,000. During the month the company worked a total of 80,000 labor hours and actual overheads totaled $600,000. The overhead at the end of the month would therefore be: A. $40,000 over-applied B. $40,000 under-applied C. $60,000 under-applied D. $20,000 over-applied E. None of the above.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Babel Ltd uses predetermined overhead rates based on labor hours. The monthly budgeted overhead is $400,000 and the budgeted labor hours were 50,000. During the month the company worked a total of 80,000 labor hours and actual overheads totaled $600,000. The overhead at the end of the month would therefore be: A. $40,000 over-applied B. $40,000 under-applied C. $60,000 under-applied D. $20,000 over-applied E. None of the above.
Transcribed Image Text:Babel Ltd uses predetermined overhead rates based on labor hours. The monthly budgeted overhead is $400,000 and the budgeted labor hours were 50,000. During the month the company worked a total of 80,000 labor hours and actual overheads totaled $600,000. The overhead at the end of the month would therefore be: A. $40,000 over-applied B. $40,000 under-applied C. $60,000 under-applied D. $20,000 over-applied E. None of the above.
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