Overhead is applied as a percent of direct labor costs.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:

Question

Quizplus · Accepted Answer

Predetermined OH rate = $112,500/$125,000 = 90%;
OH applied = $120,000(.9) = $108,000
Applied $108,000 - Actual $107,400 = $600 overapplied (credit balance)

Overhead Is Applied as a Percent of Direct Labor Costs