The most appropriate end-of-period disposition of underapplied or overapplied factory overhead
A) Is to close the amount to cost of goods sold.
B) Is to close the amount to finished goods inventory only.
C) Is to apportion the amount to finished goods inventory and cost of goods sold.
D) Depends on the significance (that is, size) of the variance in question.
E) Is to charge the amount as a period cost, e.g., "miscellaneous expense."

Question

Quizplus · Accepted Answer

The most appropriate method for handling underapplied or overapplied factory overhead depends on the significance of the variance. If the variance is small, it might be closed to cost of goods sold directly. If it's significant, it might be allocated between work in process, finished goods, and cost of goods sold based on a more detailed analysis.

The Most Appropriate End-Of-Period Disposition of Underapplied or Overapplied Factory