For the following questions, circle the best response.
Sterner Company computes its predetermined overhead application rate using direct labor hours as the activity base. Estimated and actual overhead costs and direct labor hours for the year were as follows:
| Estimated | Actual |
Manufacturing overhead costs | $126,000 | $118,020 |
Direct labor hours | 10,000 | 9,200 |
Based on this information, manufacturing overhead was
a. underapplied by $2,100.
b. underapplied by $3,420.
c. overapplied by $3,420.
d. overapplied by $5,580.
e. none of the above.
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