If overapplied or underapplied overhead is material,it should be disposed of by allocating it to:
A)Cost of goods sold and finished goods inventory.
B)Finished goods inventory and work in process inventory.
C)work in process inventory,finished goods inventory,and cost of goods sold.
D)work in process inventory.
E)Raw materials inventory,work in process inventory,and finished goods inventory.

Question

Quizplus · Accepted Answer

If overapplied or underapplied overhead is material, it means that the actual overhead incurred is different from the overhead applied to the production process. This difference should be allocated to the work in process, finished goods inventory, and cost of goods sold accounts, as these accounts are affected by overhead. Allocation of over- or under-applied overhead to only one inventory account would not be appropriate. Therefore, the best choice is option C.

If Overapplied or Underapplied Overhead Is Material,it Should Be Disposed