ECONOMICS

Detailed explanation-1: -If overhead costs is applied or assigned to the production, the applied overhead cost will be reduced from overhead cost and transferred to work in process inventory. So, the entry will be a debit to Work in process inventory and a credit to Manufacturing account.

Detailed explanation-2: -The overhead account is debited for the actual overhead costs as incurred. The overhead account is credited for the overhead costs applied to production in the work-in-process account.

Detailed explanation-3: -Recall that manufacturing overhead costs include all production costs other than direct labor and direct materials. The actual manufacturing overhead costs incurred in a period are recorded as debits in the manufacturing overhead account.

Detailed explanation-4: -A debit balance in manufacturing overhead shows either that not enough overhead was applied to the individual jobs or overhead was underapplied. If, at the end of the term, there is a credit balance in manufacturing overhead, more overhead was applied to jobs than was actually incurred.

Detailed explanation-5: -Usually manufacturing overhead costs include depreciation of equipment, salary and wages paid to factory personnel and electricity used to operate the equipment.