Estimated overhead and direct labor costs for the year were $114,500 and $124,70

Question

Estimated overhead and direct labor costs for the year were $114,500 and $124,700, respectively. During the year, actual overhead was $107,100 and actual direct labor cost was $117,000. 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 $540. A debit to Goods in Process Inventory for $540. A debit to Cost of Goods Sold for $540. A credit to Cost of Goods Sold for $540. A credit to Finished Goods Inventory for $540.

Explanation / Answer

Predetermined overhead rate =estimated overhead /estimated direct labor cost

                                            = 114500 /124700

                                             = $ .92

Overhead applied =actual direct labor cost * rate

                             = 117000 *.92

                             = $ 107640

Overhead overapplied /(underapplied_) = Applied -actua

                                                  = 107640 -107100

                                                  = 540

correct option is " D" -a credit to COGS for   540

entry :manufacturing overhead debit and COGS credit . 540

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