Estimated overhead and direct labor costs for the year were $111,500 and $126,00

Question

Estimated overhead and direct labor costs for the year were $111,500 and $126,000, respectively. During the year, actual overhead was $108,400 and actual direct labor cost was $124,000. 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 debit to Cost of Goods Sold for $720.

A credit to Finished Goods Inventory for $720.

A debit to Goods in Process Inventory for $720.

A credit to Cost of Goods Sold for $720.

A credit to Factory Overhead for $720.

Estimated overhead and direct labor costs for the year were $111,500 and $126,000, respectively. During the year, actual overhead was $108,400 and actual direct labor cost was $124,000. 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.):

Explanation / Answer

A debit to Cost of Goods Sold for $ 720

Because cost of goods sold is normally credited but as this is underapplied it should be reversed and debited to cost of goods sold.

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