Clemmens Company applies overhead based on direct labor cost.Estimated overhead and direct labor costs for the year were $112,500 and $125,000,respectively.During the year,actual overhead was $107,400 and actual direct labor cost was $120,000.The entry to close the over- or underapplied overhead at year-end,assuming an immaterial amount,would include
A)a debit to Cost of Goods Sold for $600.
B)a credit to Factory Overhead for $600.
C)a credit to Finished Goods Inventory for $600.
D)a debit to Work in Process Inventory for $600.
E)a credit to Cost of Goods Sold for $600.

Question

Quizplus · Accepted Answer

The actual overhead was less than the applied overhead, resulting in an underapplied overhead of $5,100 ($107,400 - $112,500). To close the underapplied overhead, a credit is made to Cost of Goods Sold for $5,100.

Clemmens Company Applies Overhead Based on Direct Labor Cost