Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours.Actual manufacturing overhead was $215,000,and actual labor hours were 21,000.To dispose of the balance in the Manufacturing Overhead account,which of the following would be correct?

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated based on the estimates given at the beginning of the year: $200,000 / 20,000 hours = $10 per direct labor hour. With actual labor hours being 21,000, the applied overhead would be 21,000 hours * $10/hour = $210,000. The actual overhead was $215,000, so the overhead was under-applied by $5,000 ($215,000 - $210,000). To dispose of this under-applied balance, Cost of Goods Sold would be debited for $5,000.

Manufacturing Overhead Was Estimated to Be $200,000 for the Year