How are actual manufacturing overhead costs recorded during the year?

During the year, actual manufacturing overhead costs are recorded as debits to the manufacturing overhead account. This treatment reflects the recognition of all the costs that are incurred in the manufacturing process but are not directly traceable to specific units of production.

When actual overhead costs such as utilities, rent, depreciation, and indirect labor are incurred, they increase the balance of the manufacturing overhead account. This process is crucial for tracking the total overhead costs that will later be allocated to products through a predetermined overhead rate. The debiting of the manufacturing overhead account captures these costs accurately.

In the end, this data will be combined with applied overhead to calculate underapplied or overapplied overhead at the end of the accounting period, impacting the company’s financial statements and decision-making processes.