ECONOMICS

Detailed explanation-1: -A debit balance in manufacturing overhead means underapplied overhead. A credit balance in manufacturing overhead means overapplied overhead.

Detailed explanation-2: -If, at the end of the term, there is a debit balance in manufacturing overhead, the overhead is considered underapplied overhead. A debit balance in manufacturing overhead shows either that not enough overhead was applied to the individual jobs or overhead was underapplied.

Detailed explanation-3: -Explanation: If the manufacturing overhead account has a debit balance then this means that the actual overhead incurred was more than the overhead costs applied to jobs. The overhead costs applied is based on a predetermined overhead rate.

Detailed explanation-4: -As the overhead costs are actually incurred, the Factory Overhead account is debited, and logically offsetting accounts are credited.

Detailed explanation-5: -If manufacturing overhead has a debit balance, the overhead is underapplied, and the resulting amount in cost of goods sold is understated. The adjusting entry is: If manufacturing overhead has a credit balance, the overhead is overapplied, and the resulting amount in cost of goods sold is overstated.