Answer:
b. understate the predetermined overhead rate
Explanation:
[tex]\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate[/tex]
The rate is determinate by distributing the expected cost over the cost driver
In this case labor cost.
as this value is higher than it should
(labor + some indirect)
[tex]\frac{Cost\: Of \:Manufacturing \:Overhead}{direct \: labor+ indirect \: labor}= Overhead \:Rate[/tex]
the result of the division will be lower thus, the overhead rate is lower than it should be without the mistake.
