Question

Manufacturing overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $225,000, and actual direct labor hours were 19,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct?
A. Manufacturing Overhead would be credited for $12,500.
B. Manufacturing Overhead would be credited for $25,000.
C. Manufacturing Overhead would be debited for $12.500.
D. Manufacturing Overhead would be debited for $25,000

Answer 1

Answer:

C. Manufacturing Overhead would be debited for $12,500

Explanation:

Based on the information given to dispose of the balance in the Manufacturing Overhead account the correct entry will be:

Manufacturing Overhead would be debited for $12,500

Calculated as:

First step is to calculate the Predetermined overhead rate

Predetermined overhead rate = $250,000/20,000

Predetermined overhead rate = $12.50

Second step is to calculate the Applied manufacturing overhead

Applied manufacturing overhead =$12.50 *

*19,000

Applied manufacturing overhead= $237,500

Now let calculate Overapplied Manufacturing overhead

Overapplied Manufacturing overhead = $237,500 - $225,000

Overapplied Manufacturing overhead= $12,500 Debited to Manufacturing Overhead

Therefore To dispose of the balance in the Manufacturing Overhead account the correct entry is Manufacturing Overhead would be debited for $12,500