Clemmens Company applies overhead based on direct labor cost. Estimated overhead and direct labor costs for the year were $115,500 and $125,300, respectively. During the year, actual overhead was $107,700 and actual direct labor cost was $118,000. The entry to close the over- or underapplied overhead at year-end, assuming an immaterial amount, would include

Please see below

Explanation:

With regards to the above, we need to compute first the predetermined overhead rate in order to ascertain whether it is over or under applied overhead

Predetermined overhead rate = Estimated overhead cost / Direct labor cost

= $115,500 / $125,300

= 0.92

We can now compute the under or over applied overhead as seen below;

= Actual direct labor cost × predetermined overhead rate - Actual overhead

= $118,000 × 0.92 - $107,700

= $108,560 - $107,700

= $860

Because the above amount is positive, is over applied overhead and the journal entry would be;

Manufacturing overhead account Dr $860

To Costs of goods sold account Cr $860

(Being over applied overhead closed)

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