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 $118,500 and $124,300, respectively. During the year, actual overhead was $106,700 and actual direct labor cost was $112,800. 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.) O A credit to Cost of Goods Sold for $460. A debit to Work in Process Inventory for $460 O A debit to Cost of Goods Sold for $460. O A credit to Factory Overhead for $460 OA credit to Finished Goods Inventory for $460

Explanation / Answer

The over or under-applied manufacturing overhead is defined as the difference between manufacturing overhead cost applied to work in process and manufacturing overhead cost actually incurred during a period.

If the manufacturing overhead cost applied to work in process is more than the manufacturing overhead cost actually incurred during a period, the difference is known as over-applied manufacturing overhead. On the other hand; if the manufacturing overhead cost applied to work in process is less than the manufacturing overhead cost actually incurred during a period, the difference is known as under-applied manufacturing overhead.

from the above information it is clear that

a credit shold be given to the cost of goods sold by $460

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