Question

Clemmens Company applies overhead based on direct labor cost. Estimated overhead and direct labor costs for the year were $116,500 and $124,500, respectively. During the year, actual overhead was $106,900 and actual direct labor cost was $114,500. The entry to close the over- or underapplied overhead at year-end, assuming an immaterial amount, would include (Round predetermined overhead rate to nearest whole percentage.):

Answer 1

$415 underapplied (debit balance)

Step-by-step explanation:

Predetermined OH rate =

$116,500/$124,500 = 93%

OH applied = $114,500(.93)

= $106,485

Applied $106,485– Actual $106,900

= $415 underapplied (debit balance)

Therefore the entry to close the over- or underapplied overhead at year-end, assuming an immaterial amount, would include $415 underapplied (debit balance)