If a Company Applies Overhead to Production with a Predetermined

question 14

Multiple Choice

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.

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Definitions:

Direct Materials Cost

The cost of raw materials that can be directly attributed to the production of goods.

Factory Machinery

Heavy equipment and tools used in a manufacturing or production environment to produce goods.

Factory Overhead Cost

Expenses related to the operation of a manufacturing facility that are not directly tied to a specific product, including utilities, depreciation, and maintenance.

Depreciation

The process of allocating the cost of a tangible asset over its useful life, reflecting the decrease in value over time.