If underapplied factory overhead is material,it is prorated among Work in Process Inventory,Finished Goods Inventory,and Cost of Goods Sold.

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Underapplied factory overhead is a result of actual factory overhead being less than the amount allocated to production during the period. If this is material, it must be prorated among the three inventory accounts (Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold) using a predetermined overhead rate. This helps to ensure that the costs of production are properly accounted for and allocated to the appropriate accounts.

If Underapplied Factory Overhead Is Material,it Is Prorated Among Work