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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

a.What is (1) overapplied factory overhead and (2) underapplied factory overhead?
b. If the factory overhead account has a positive balance, was factory overhead underapplied or overapplied?

To determine

Concept Introduction:

Predetermined overhead allocation:

Manufacturing overhead cost is the pool of all indirect costs incurred for the production. These are the costs which are not directly traceable to the product. Manufacturing costs include indirect material indirect labor and overheads. These costs are allocated to the products using the predetermined overhead allocation rate. The formula of predetermined overhead allocation rate is as follows:

  Predetermined overhead allocation rate = Estimated Manufacturing overhead CostAllocation base 

Requirement-a:

To Indicate:

The meaning of over or under applied factory overhead

Explanation

Manufacturing overhead cost is the pool of all indirect costs incurred for the production. These are the costs which are not directly traceable to the product. Manufacturing costs include indirect material indirect labor and overheads...

To determine

Concept Introduction:

Predetermined overhead allocation:

Manufacturing overhead cost is the pool of all indirect costs incurred for the production. These are the costs which are not directly traceable to the product. Manufacturing costs include indirect material indirect labor and overheads. These costs are allocated to the products using the predetermined overhead allocation rate. The formula of predetermined overhead allocation rate is as follows:

  Predetermined overhead allocation rate = Estimated Manufacturing overhead CostAllocation base 

Requirement-b:

To Indicate:

The over or under applied overhead if the factory overhead account has a positive balance

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