Martinez Manufacturing applies overhead based on direct labor hours.The company estimates that their overhead for the year will be $180,000,and that they will use 72,000 direct labor hours.Martinez Manufacturing actually used 75,000 direct labor hours.The journal entry to record manufacturing overhead would include a:

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Overhead is applied based on direct labor hours. The actual overhead incurred is $187,500 (75,000 hours x $2.50 per hour). The journal entry to record manufacturing overhead would include a debit to Work in Process Inventory for $187,500 and a credit to Manufacturing Overhead Applied for $180,000.

Martinez Manufacturing Applies Overhead Based on Direct Labor Hours