Overapplied or Underapplied overhead
At year-end 2010, Dub's Wind Generator Co. had a $40,000 debit balance in its Manufacturing Overhead Control account. Overhead is applied to products based on direct labor cost. Relevant account balance information at year-end given:
a. Find what predetermined OH rate was used in the year?
___ % of direct labor cost
b. Give arguments to be used for deciding whether to prorate the balance in the overhead account at year-end.
c. Prorate overhead account balance based on relative balances of appropriate accounts.
Work in Process Inventory $ ___
Finished Goods Inventory $ ___
Cost of Goods Sold $ ___
Total $ ___
d. Find some possible reasons that company had a debit balance in overhead account at year-end.