Clemmens Company applies overhead based on direct labor cost. Estimated overhead

Question

Clemmens Company applies overhead based on direct labor cost. Estimated overhead and direct labor costs for the year were $115,500 and $125,300, respectively. During the year, actual overhead was $107,700 and actual direct labor cost was $118,000. The entry to close the over- or underapplied overhead at year-end, assuming an immaterial amount, would include (Round predetermined overhead rate to nearest whole percentage.): A credit to Factory Overhead for $860. A credit to Cost of Goods Sold for $860. A credit to Finished Goods Inventory for $860. A debit to Cost of Goods Sold for $860. A debit to Work in Process Inventory for $860.

Explanation / Answer

Overhead cost rate as % direct labor:

= $115,500/$125,300

= 92.18%

Applied overheads:

= $118,000×92.18%

= $108,772

Over applied overheads = $108,772-$107,700 = $1,072

Credit to Cost of Goods Sold for $860 is correct option

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.