If a company applies overhead to production with a predetermined overhead rate, a credit balance in the factory overhead account at the end of the period means that:

A credit balance in the Factory Overhead account means that the overhead costs are Over applied.

Explanation:

A credit balance in the Factory Overhead account means that the overhead costs are Over applied. Over applied overhead means that the actual overhead costs are lesser than the cost applied to the production.

The over or under applied overhead is calculated as follows

Actual Factory Overhead                                                                      xxx

Applied / Absorbed Factory Overhead                                                (xxx)

Over or Under Applied overhead                                                         xxx

Over applied  means the actual overhead cost is lesser than the cost applied to the production

Under applied  means the actual overhead cost is greater than the cost applied to the production

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