Question

1)What is the difference between actual and applied manufacturing overhead?

2)What is the journal entry for actual manufacturing overhead?

3)What is the journal entry to apply manufacturing overhead?

4)How do you know if manufacturing overhead is under or over applied?

 5)Why is it important to adjust Cost of Goods Sold for under/over applied manufacturing overhead?

6)Identify the four level hierarchy that in which costs are grouped while creating an Activity-Based Costing System. Choose a manufacturing company and identify three types of costs that should be included in each category. 

Answer 1

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1.
Actual overheads are overhead which are incurred in factory during the period.
These overheads are ACTUALLY incurred in the factor
Applied overheads are overhead which are calculated based on predetermined
overhead rate.
These are not actually incurred overhead rather overhead calculated on actual
allocation base.
2.
	Account	Debit	Credit
	Manufacturing Overhead	Debit
	Cash/Payable		Credit
3.
	Account	Debit	Credit
	Work in Process	Debit
	Manufacturing Overhead		Credit
4.	If Applied overhead are more than actual, it is overapplied overheads
	If Applied overhead are less than actual, it is underapplied overheads