Assume that variable overhead is overapplied by $200 and fixed overhead is underapplied by $100. If these variances are considered immaterial, the effect on cost of goods sold is:
A) $300 increase
B) $100 increase
C) $300 decrease
D) $100 decrease

Question

Quizplus · Accepted Answer

Since both variances are considered immaterial, they are simply written off to cost of goods sold as an adjustment. The net effect is a decrease in cost of goods sold by the amount of the underapplied fixed overhead, which is $100. Therefore, the correct answer is D, a $100 decrease.

Assume That Variable Overhead Is Overapplied by $200 and Fixed