Overhead is applied as a percent of direct labor costs.Estimated overhead and direct labor costs for the year were $250,000 and $125,000,respectively.During the year,actual overhead was $248,000 and actual direct labor cost was $123,000.The entry to close the over- or underapplied overhead at year-end,assuming an immaterial amount,would include:
A) A debit to Cost of Goods Sold for $2,000.
B) A debit to Factory Overhead for $2,000.
C) A credit to Finished Goods Inventory for $2,000.
D) A debit to Goods in Process Inventory for $2,000.
E) A credit to Cost of Goods Sold for $2,000.

Question

Quizplus · Accepted Answer

Predetermined OH rate = $250,000/$125,000=200%
OH applied = $123,000(2.0) = $246,000
Applied $246,000 - Actual $248,000 =$2,000 underapplied (debit balance)

Overhead Is Applied as a Percent of Direct Labor Costs