Question

The Manufacturing Overhead account shows debits of $30,000, $24,000, and $28,000 and one credit for $86,000. Based on this information, manufacturing overhead 

• has been overapplied. 

• has not been tapped. 

• has been underapplied. 

• shows a zero balance. 

Answer 1

answer is option a) Has been over applied

Total debit balance= 30000 + 24000 +28000 = 82000

total credit balance = 86000

Debit side is more than credit side by $ 4000. whch means over applied

Answer 2

Concepts and reason

Manufacturing Overhead: These are the expenditures which are directly associated with the manufacturing of goods or services other than the direct labor and direct material. All indirect material, indirect labor, indirect overheads come under this category.

Fundamentals

Actual Manufacturing Overhead Incurred: It refers as actual cost of overhead incurred by the organization to accomplish the goal of the business by producing the finished goods. Actual manufacturing overhead has debit balance as it is an expense.

Manufacturing Overhead applied: Manufacturing overheads are applied to the production of the finished goods on the basis of predetermined rate of overhead. Applied manufacturing overhead has credit balance because it is applied to the work-in progress.

Over/Under applied of manufacturing Overhead: The balance of manufacturing overhead account would be allocated to the goods manufactured. So, at the end of the period, there should be an adjustment for the difference between the manufactured overhead applied to the product and the actual overhead incurred. This will result in an over or underapplied of manufacturing overhead.

The formula for Over applied/ (under applied) Overhead is given below:

${\rm{Over}}\,{\rm{applied/}}\,\left( {{\rm{Under}}\,{\rm{applied}}} \right)\,{\rm{Overhead}} = \left( \begin{array}{c}\\{\rm{Applied}}\,{\rm{Overhead}}\left( {{\rm{credit}}\,{\rm{balance}}} \right)\\\\ - {\rm{Actual}}\,{\rm{Overhead}}\,{\rm{incurred}}\left( {{\rm{debit}}\,{\rm{balance}}} \right)\\\end{array} \right)$

Compute the total of actual overhead incurred:

$\begin{array}{c}\\{\rm{Actual}}\,{\rm{overhead}}\,{\rm{incurred}} = \,{\rm{Total}}\,{\rm{of}}\,{\rm{all}}\,{\rm{debit}}\,{\rm{balance}}\,{\rm{of}}\,{\rm{manufacturing}}\,{\rm{overhead}}\\\\ = \left( {\$ 30,000 + \$ 24,000 + \$ 28,000} \right)\\\\ = \$ 82,000\\\end{array}$

Determine the manufacturing overhead as under applied, over applied:

$\begin{array}{c}\\{\rm{Over}}\,{\rm{applied/}}\,\left( {{\rm{Under}}\,{\rm{applied}}} \right)\,{\rm{Overhead}} = \left( \begin{array}{c}\\{\rm{Applied}}\,{\rm{Overhea}}{{\rm{d}}_{\left( {{\rm{credit}}\,{\rm{balance}}} \right)}}\\\\ - {\rm{Actual}}\,{\rm{Overhead}}\,{\rm{incurre}}{{\rm{d}}_{\left( {{\rm{debit}}\,{\rm{balance}}} \right)}}\\\end{array} \right)\\\\ = \$ 86,000 - \$ 82,000\\\\ = \$ 4,000\,\,{\rm{Over}}\,{\rm{applied}}\\\end{array}$

Ans:

Manufacturing overhead is over applied.