The correct answer is: B. Under applied
Factory overhead is an indirect cost of production that is not easily traced to a specific product or service. It includes costs such as indirect labor, indirect materials, and factory overhead.
When factory overhead control account has an ending debit balance, it means that the actual factory overhead costs incurred during the period were greater than the amount of factory overhead applied to production during the period. This can happen for a number of reasons, such as inaccurate estimates of factory overhead costs, changes in production levels, or inefficiencies in production.
When factory overhead is under applied, it means that the company has incurred a cost that it will not be able to recover through sales. This can have a negative impact on the company’s profitability.
Here is a brief explanation of each option:
- Option A: Over applied. This means that the actual factory overhead costs incurred during the period were less than the amount of factory overhead applied to production during the period. This can happen for a number of reasons, such as inaccurate estimates of factory overhead costs, changes in production levels, or efficiencies in production. When factory overhead is over applied, it means that the company has saved money on its production costs.
- Option B: Under applied. This is the correct answer. See above for explanation.
- Option C: Both A and B. This is not possible. If factory overhead is over applied, then it cannot also be under applied.
- Option D: None of these. This is also not possible. If factory overhead is over applied or under applied, then it must be one of those two things.