Actual manufacturing overhead for the current period is $19,600 while allocated manufacturing overhead for the current period is $18,700. What is the proper entry to dispose of the manufacturing overhead balance?

Question

Quizplus · Accepted Answer

Since actual manufacturing overhead ($19,600) is higher than allocated manufacturing overhead ($18,700), there is an under-applied overhead of $900. The correct way to dispose of this under-applied balance is to increase the cost of goods sold by debiting it and to eliminate the balance by crediting manufacturing overhead.

Actual Manufacturing Overhead for the Current Period Is $19,600 While