A manufacturing company applies factory overhead based on direct labor hours. At

Question

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

debit to factory overhead for $360,000.

credit to factory overhead for $432,000.

debit to factory overhead for $377,200.

credit to factory overhead for $360,000.

debit to factory overhead for $360,000.

credit to factory overhead for $432,000.

debit to factory overhead for $377,200.

credit to factory overhead for $360,000.

Explanation / Answer

The correct answer is option B.

credit to factory overhead for $376,000.

predetermined overhead rate is the estimated overhead divided by the estimated hours is 360,000/30,000 = $12 per hour.

Actual hours of 36,000 times this rate is(36000x12) $432,000.

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