ECONOMICS

Detailed explanation-1: -If a company applies overhead to production with a predetermined overhead rate, a credit balance in the Factory Overhead account at the end of the period means that: Actual overhead incurred was less than the overhead amount applied to production.

Detailed explanation-2: -Overapplied overhead. Factory overhead applied is in excess of Actual overheads which means, the allocated overhead is more than the actual overhead. And, when the difference between the allocated and actual overhead when allocated overhead is more, it is called overapplied overhead. So, the correct answer is option c.

Detailed explanation-3: -You can calculate predetermined overhead rate by dividing the manufacturing overhead cost by the activity driver. For example, if the activity driver was machine-hours, then you would divide overhead costs by the estimated number of machine hours.

Detailed explanation-4: -Applied overhead is the amount that is added to jobs as work is completed. This is done during the year as work is completed using the predetermined overhead rate and actual activity. Actual overhead is the amount of overhead cost that the company actually incurred.

Detailed explanation-5: -Actual overhead is indirect factory costs that have been incurred. This is essentially all factory costs, except for direct material and direct labor costs. Actual overhead may differ from applied overhead, which can be based on a standard overhead rate that differs somewhat from the actual amount of overhead incurred.