Manufacturing overhead was estimated to be $250,000 for the year along with 20,0

Question

Manufacturing overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $225,000, and actual direct labor hours were 19,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? Manufacturing Overhead would be credited for $12,500. Manufacturing Overhead would be credited for $25,000. ·Manufacturing Overhead would be debited for $12.500. Manufacturing Overhead would be debited for $25,000

Explanation / Answer

Answer is Manufacturing overhead would be debited for $12500

Manufacturing Overhead Absorption Rate =250000/20000=12.5 Per DLH

Manufacturing Overhead Applied =Actual DLH*Manufacturing Overhead Absorption Rate =19000*12.5 =237500

Overhead Over Applied=237500-22500=12500

OVerhead Applied has to be reduced by Debiting Manufacturing Overhead and Crediting Cost of Goods Sold

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