A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be $360,000 and direct labor hours would be 30,000. Actual manufacturing overhead costs incurred were $377,200, and actual direct labor hours were 36,000. The entry to apply the factory overhead costs for the year would include a

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The factory overhead rate is calculated as estimated overhead costs divided by estimated direct labor hours ($360,000 / 30,000 hours = $12 per hour). The applied overhead is then calculated using actual direct labor hours (36,000 hours * $12 = $432,000). Therefore, the entry to apply the factory overhead costs would include a credit to factory overhead for $432,000.

A Manufacturing Company Applies Factory Overhead Based on Direct Labor