Question

Mango Company applies overhead based on direct labor costs. For the current year, Mango Company estimated total overhead costs to be $600,000, and direct labor costs to be $300,000. Actual overhead costs for the year totaled $615,000, and actual direct labor costs totaled $335,000. At year-end, the balance in the Factory Overhead account is a:

Answer 1

Factory Overhead Balance= $55,000.

Step-by-step explanation:

Over-applied overhead = Assigned Overhead − Actual Overhead

Where Assigned Overhead= Actual Direct Labor×Overhead rate

Where Overhead rate = Estimated overhead / Estimated Direct Labor * 100

Overhead rate= 600000/300000 * 100

Overhead Rate= 200%

Assigned Overhead = ​335,000 * 200%

Assigned Overhead = 670,000

Therefore, the assigned overhead to be applied is $670,000.

Now, Over-applied overhead = Assigned Overhead − Actual Overhead

Factory Overhead = $670,000 - $615,000

Factory Overhead Balance= $55,000.

Answer 2

55,000 Credit balance

Explanation:

Mango Company

Predetermined overhead rate /Estimated overhead cost

= $600,000 / $300,000

Estimated direct labor cost = 200%

Applied overhead :

=Actual direct labor cost of $335,000 × 200%

= $670,000

Overhead incurred-Overhead applied

$615000 – $670,000

=$55,000

Therefore At year-end, the balance in the Factory Overhead account is a: credit of $55,000