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Mango Company applies overhead based on direct labor costs. For the current year, Mango Company estimated total overhead costs to be $360,000, and direct labor costs to be $180,000. Actual overhead costs for the year totaled $387,000, and actual direct labor costs totaled $203,000. At year-end, the balance in the Factory Overhead account is a:

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TomShelby

Answer:

Balance for the Factory Overhead account: 19,000 credit

Explanation:

We will first, calculate the overhead rate based on the predetermination overhead rate:

[tex]\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate[/tex]

The total manufacturing cost will be distributed over the cost driver. In this case, labor cost:

360,000/180,000 = 2 overhead rate

Then, we calculate the applied overhead 203,000 x 2 = 406,000

Now, the balance for factory overhead account:

Actual overhead: 387,000 debit

        payable, accumulated depreicaiton and other 387,000 credit

WIP 406,000 debit

Applied Overhead 406,000 credit

Balance:

406,000 - 387,000 = 19,000 credit

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