The correct answer is: D. both A and C
Manufacturing overhead cost allocated to individual jobs is classified as both manufacturing overhead allocated and manufacturing overhead applied.
- Manufacturing overhead allocated is the amount of manufacturing overhead that is assigned to a job or production order. This is done using a predetermined overhead rate, which is calculated by dividing the estimated annual manufacturing overhead by the estimated annual activity base.
- Manufacturing overhead applied is the amount of manufacturing overhead that is actually incurred on a job or production order. This is calculated by multiplying the actual activity for the job or production order by the predetermined overhead rate.
The difference between manufacturing overhead allocated and manufacturing overhead applied is called the manufacturing overhead variance. This variance can be favorable or unfavorable. A favorable variance means that less manufacturing overhead was incurred than was allocated, while an unfavorable variance means that more manufacturing overhead was incurred than was allocated.
The manufacturing overhead variance is analyzed to determine the reasons for the difference. This information is then used to make adjustments to the predetermined overhead rate or to improve the control of manufacturing overhead costs.