Question

Which terms will make the following statement true? When manufacturing overhead is overapplied, the Manufacturing Overhead account has a __________ balance and applied manufacturing overhead is greater than __________ manufacturing overhead.
a) debit, actual
b) credit, actual
c) debit, estimated
d) credit, estimated

Answer 1

Answer:

Answer is a) debit, actual

Manufacturing Overhead account has a debit balance and applied manufacturing overhead is greater than the actual manufacturing overhead

Explanation:

Overheads are applied to product costs using budgeted overhead rates. Budgeted rates are used because the delays in obtaining actual overhead affects timeous product valuation for profit purposes

Over applied situation occurs when the applied overheads exceeds the actual manufacturing overhead.

The Manufacturing Overhead Account will have the following entries:

Transfer to work in Progress figure - credit (with applied overheads)

Bank - debit (actual overhead)

Balancing figure or shortfall - debit (over-applied)