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Calculation of Underapplied or Overapplied Overhead

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At year end, records show that actual overhead costs incurred were $25,870 and the amount of overhead costs applied to production was $27,000. Identify the amount of under- or over applied overhead, and indicate whether the cost of goods sold account should be increased or decreased to reflect actual overhead costs.

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The solution explains how to calculate the under applied or over applied overhead

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Overhead are indirect manufacturing costs which include all manufacturing costs other than direct labor and direct material. Overhead is applied to production ...

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