Mango Company applies overhead based on direct labor costs.For the current year,Mango Company estimated total overhead costs to be $300,000,and direct labor costs to be $150,000.Actual overhead costs for the year totaled $330,000,and actual direct labor costs totaled $170,000.
-At year-end,the balance in the Factory Overhead account is a:
A)$330,000 Debit balance.
B)$170,000 Debit balance.
C)$10,000 Credit balance.
D)$340,000 Credit balance.
E)$10,000 Debit balance.

Question

Quizplus · Accepted Answer

Since overhead is applied based on direct labor costs, the estimated overhead rate is $300,000 ÷ $150,000 = $2 per dollar of direct labor. This means that for actual direct labor costs of $170,000, the applied overhead would be $2 × $170,000 = $340,000. However, actual overhead costs for the year were only $330,000, leaving a $10,000 credit balance in the Factory Overhead account.

Mango Company Applies Overhead Based on Direct Labor Costs