The estimates used to calculate the predetermined overhead rate will virtually always:
A) prove to be correct.
B) result in a year-end balance of zero in the Manufacturing Overhead account.
C) result in overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.
D) result in underapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.
E) result in either underapplied or overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.

Question

Quizplus · Accepted Answer

The predetermined overhead rate is an estimate of the manufacturing overhead costs, which rarely matches the actual overhead costs exactly. This discrepancy leads to either underapplied or overapplied overhead. When the amount is immaterial, it is common practice to close it to the Cost of Goods Sold to simplify the accounting process.

The Estimates Used to Calculate the Predetermined Overhead Rate Will