The underapplied factory overhead amount may be transferred to cost of goods sold at the end of the fiscal year.

Question

Quizplus · Accepted Answer

This is true because the underapplied factory overhead represents an expense that was not allocated to products during the year, resulting in an inaccurate cost of goods sold amount. To correct this, the underapplied amount can be transferred to cost of goods sold at the end of the fiscal year to adjust for the unallocated expense.

The Underapplied Factory Overhead Amount May Be Transferred to Cost