The correct answer is: A. actual, applied
Factory expenses are expenses incurred during production other than direct materials and direct labor. They are also known as indirect expenses or overhead expenses. Factory expenses can be classified into two categories: variable factory expenses and fixed factory expenses. Variable factory expenses are expenses that vary in direct proportion to the volume of production. Fixed factory expenses are expenses that remain constant in total regardless of the volume of production.
Applied factory expenses are factory expenses that are charged to production on an estimated basis. They are calculated by multiplying the estimated factory overhead rate by the actual production volume. The estimated factory overhead rate is determined by dividing the estimated total factory overhead costs by the estimated total production volume.
The following are the explanations of each option:
- Option B: applied, actual. Applied factory expenses are charged to production on an estimated basis, while actual factory expenses are charged to production on a actual basis.
- Option C: indirect, direct. Factory expenses are indirect expenses, while direct materials and direct labor are direct expenses.
- Option D: None of these. Option D is not a correct answer.