Darrow Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs.Last year, the Corporation worked 10,000 direct labor-hours and incurred $80,000 of actual manufacturing overhead cost.If overhead was underapplied by $2,000, the predetermined overhead rate for the Corporation for the year must have been:

A) $7.80 per direct labor-hour
B) $8.00 per direct labor-hour
C) $8.20 per direct labor-hour
D) $8.40 per direct labor-hour

Predetermined Overhead Rate

A rate calculated at the beginning of the accounting period to allocate overhead costs to products or services, based on estimated costs and activity levels.

Direct Labor-Hours

The cumulative number of hours put in by workers who are directly engaged in producing goods or delivering a service.

Manufacturing Overhead

Costs related to the production environment that cannot be directly tied to the finished product, such as maintenance expenses, and are necessary for the manufacturing process.