Morris Company applies overhead based on direct labor costs. For the current year, Morris Company estimated total overhead costs to be $432,000, and direct labor costs to be $2,160,000. Actual overhead costs for the year totaled $404,000, and actual direct labor costs totaled $1,880,000. At year-end, the balance in the Factory Overhead account is a:

$28,000 Underapplied

Explanation:

Calculation for what the balance in the Factory Overhead account is

Estimated Overhead Cost/Estimated DL = Overhead Rate

$432,000/$2,160,000 = 20 %

Actual Overhead: $404,000

Applied Overhead: (DL 20%) = ($1,880,000 20%) = $376,000

Actual OH - Applied OH = FOH

$404,000 - $376,000 =

$28,000 Underapplied

Therefore At year-end, the balance in the Factory Overhead account is a:$28,000 Underapplied

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