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
D)result in underapplied overhead that is closed to Cost of Goods Sold if it is immaterial in
E)result in either underapplied or overapplied overhead that is closed to Cost of Goods Sold

Question

Quizplus · Accepted Answer

The estimates used to calculate the predetermined overhead rate are based on assumptions and can sometimes differ from the actual overhead costs incurred. Thus, applying the predetermined overhead rate to actual overhead costs may result in either underapplied or overapplied overhead. Underapplied/overapplied overhead is closed to Cost of Goods Sold at the end of the accounting period to ensure that actual costs are matched with expenses. The amount closed to Cost of Goods Sold will depend on the materiality of the underapplied/overapplied amount.

The Estimates Used to Calculate the Predetermined Overhead Rate Will