2.5 Applied Manufacturing Overhead

underapplied overhead

Manufacturing overhead has a debit balance The overhead assigned to work in process is less than the overhead incurred.

Costs of Goods Manufacturing Schedule

The cost of goods manufactured schedule in job order costing is the same as in the preceding chapter Managerial Accounting, with one exception: Manufacturing overhead applied, rather than actual overhead costs, is added to direct materials and direct labor to determine total manufacturing costs. The schedule is prepared directly from the Work in Process Inventory account.

In this example, overhead is

Underapplied

If actual is less than applied:

Manufacturing overhead is overapplied.

If actual is greater than applied:

Manufacturing overhead is underapplied.

overapplied overhead

Manufacturing overhead that has a credit balance The overhead assigned to work in process is greater than the overhead incurred.