Question
Edison company, which uses a job order cost system, applies overhead using predetermined rate based on direct labour hours. For 20x2, the company estimated it
Edison company, which uses a job order cost system, applies overhead using predetermined rate based on direct labour hours. For 20x2, the company estimated it would spend $400,000 on total manufacturing overhead and that it would use 250,00 direct labour hours. At the end of the year, the company had used 220,00 direct labour hours and incurred $390,00 of actual overhead.
What is the entry to cost of goods sold to close out the under or over applied overhead, assuming that the entire amount of over or under applied over head is fully charged to cost of goods sold?
A) Debit $10,000 B) Debit $48,000 C) Debit $38,000 D) Credit $38,000
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