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PB8.
LO 4.6Queen Bee’s Honey, Inc., estimated its annual overhead to be $110,000 and based its predetermined overhead rate on 27,500 direct labor hours. At the end of the year, actual overhead was $106,000 and the total direct labor hours were 29,000. What is the entry to dispose of the overapplied or underapplied overhead?

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Answer:

                                                                   Debit               Credit

Applied overheads                                    $110,000

Cost of sales (over applied overheads)                             $4,000

Overhead control account                                                 $106,000

Explanation:

Since the estimated overhead amounting to $110,000 are greater than the actual overheads amounting to $106,000, therefore the overheads are overapplied by $4,000.

The journal entry to disposed off the overapplied overheads are given below:

                                                                   Debit               Credit

Applied overheads                                    $110,000

Cost of sales (over applied overheads)                             $4,000

Overhead control account                                                 $106,000