Selwyn's Service Applied Overhead on the Basis of Direct Labor

question 115

Essay

Selwyn's Service applied overhead on the basis of direct labor costs during the current year. Overhead applied was $16,500. Actual overhead incurred was $17,200.
(a) Prepare a journal entry to remove this difference assuming that it is not material.
(b) Instead, assume actual overhead incurred was only $24,000. Describe (without computations) the alternative procedure that Selwyn might use to record this material difference.

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Definitions:

Discount Date

The specified date on which a discount is applied or becomes effective, often used in the context of payments or billing.

Due Date

The specified date by which a payment, assignment, or project must be completed or submitted.

Cash Discount

A reduction in the price of goods or services offered by the seller to encourage prompt payment by the buyer.

Discount Date

The date on which a payment is to be made earlier than its originally scheduled due date at a reduced rate.