If a company applies overhead to production with a predetermined rate, a credit balance in the Factory Overhead account at the end of the period means that:
A) The bookkeeper has made an error because the debits don't equal the credits.
B) The balance will be carried forward to the next period as an overhead cost.
C) Actual overhead incurred was less than the overhead amount charged to production.
D) The overhead was underapplied for the period.
E) Actual overhead was greater than the overhead amount charged to production.

Question

Quizplus · Accepted Answer

A credit balance in the Factory Overhead account indicates that the actual overhead costs were less than the overhead costs applied to production based on the predetermined rate. This means the company overestimated its overhead costs when applying them to production.

If a Company Applies Overhead to Production with a Predetermined