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Problem 19

# Culpepper Corporation had the following inventories at the beginning and end of the month of January: $$\begin{array}{lrr} & \text { January 1 } & \text { January 31 } \\ \hline \text { Finished goods } & \ 125,000 & \ 117,000 \\ \text { Work-in-process } & 235,000 & 251,000 \\ \text { Direct materials } & 134,000 & 124,000 \end{array}$$ The following additional manufacturing data was available for the month of January. $$\begin{array}{ll} \text {Direct materials purchased} & \text {\ 189,000} \\ \text {Transportation in} & \text {3,000}\\\ \text {Direct labor} & \text {400,000}\\\ \text {Actual factory overheadd} & \text {175,000}\\\ \end{array}$$ Culpepper Corporation applies factory overhead at a rate of $$40 \%$$ of direct labor cost, and any overapplied or underapplied factory overhead is deferred until the end of the year. Culpepper's balance in its factory overhead control account at the end of January was: 1\. $$\ 15,000$$ overapplied. 2\. $$\ 15,000$$ underapplied. 3\. $$\ 5,000$$ underapplied. 4\. $$\ 5,000$$ overapplied.

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## Step 4: Sign of the Overapplied or Underapplied Factory Overhead

Since the actual factory overhead is more than the applied factory overhead, the $15,000 is underapplied, and not overapplied. So, the correct answer from the given options on Culpepper Corporation's factory overhead control account balance at the end of January is: 2.$15,000 underapplied.

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