How much overhead will be applied to a job if total direct labor on the job is $

Question

How much overhead will be applied to a job if total direct labor on the job is $6,500 and the predetermined overhead rate (POHR) is 85% of direct labor costs assuming overhead is applied on the basis of direct labor dollars? What is the journal entry to record the applied overhead?* points Debit Factory Overhead $5,525 and Credit Work in Process iInventory $5,525 O Debit work in Process Inventory $5,525 and Credit Factory Overhead O Debit Factory Overhead $7,647 and Credit Work in Process Inventory o Debit Work in Process Inventory $7,647 and Credit Factory Overhead $7,647 $7,647 When the overhead applied to jobs based on the predetermined overhead rate (POHR) in a period is more than the actual overhead costs incurred during the period, overhead is considered: * 0 points O Under-applied O Over-applied

Explanation / Answer

Answers

--Manufacturing Overhead account is:
debited by the amount of Actual Overhead, and
credited by the amount of Applied Overhead

--Applied Overhead here = 85% of direct labor cost = $ 6,500 x 85% = $ 5,525

--Hence, Factory Overhead would be credited by $ 5,525

--The account to be debited is Work in Process Inventory.

--Hence, correct answer = Option #2: Debit WIP Inventory $ 5,525 and Credit Factory Overhead $ 5,525

--Correct answer is Over-Applied [Option #2]

--When Applied Overheads are MORE than Actual Overhead = Over Applied.

--When Applied Overhead are LESS than Actual Overhead = Under Applied.

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