If actual overhead incurred during a period exceeds applied overhead, the difference will be a debit balance in the Factory Overhead account at the end of the period.

Question

Quizplus · Accepted Answer

This is because the Factory Overhead account is a temporary account used to record the difference between actual overhead incurred and applied overhead. If actual overhead is greater than applied overhead, this means that more overhead was incurred than was allocated to production. Thus, the Factory Overhead account will have a debit balance representing the amount of underallocated overhead.

If Actual Overhead Incurred During a Period Exceeds Applied Overhead