Overhead Is Applied as a Percent of Direct Labor Costs

question 146

Multiple Choice

Overhead is applied as a percent of direct labor costs.Estimated overhead and direct labor costs for the year were $112,500 and $125,000,respectively.During the year,actual overhead was $107,400 and actual direct labor cost was $120,000.The entry to close the over- or underapplied overhead at year-end,assuming an immaterial amount,would include:

• A) A debit to Cost of Goods Sold for $600.
• B) A credit to Factory Overhead for $600.
• C) A credit to Finished Goods Inventory for $600.
• D) A debit to Goods in Process Inventory for $600.
• E) A credit to Cost of Goods Sold for $600.

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Definitions:

Due Today

The amount of money that must be paid or is payable today.

Interest Free

Describes a loan or credit arrangement that does not require the borrower to pay interest on the borrowed amount.

Short Term Debt

Refers to any financial obligation that is due for repayment within one year.

Interest Rate

The portion of a loan subject to interest fees for the borrower, typically indicated as an annual percentage of the remaining loan principal.