The existence of under- or overapplied overhead at the end of the year:
A) requires an adjustment to Cost of Goods Sold.
B) indicates that an error has been made.
C) requires a retroactive adjustment to the cost of all jobs completed.
D) is written off as a bad estimate expense.

Question

Quizplus · Accepted Answer

Under- or overapplied overhead means that the actual overhead incurred is different from the amount allocated to jobs using the predetermined overhead rate. This requires an adjustment to Cost of Goods Sold at the end of the year to reflect the actual overhead expenses.

The Existence of Under- or Overapplied Overhead at the End