If overapplied or underapplied overhead is material, it should be disposed of by allocating it to:
A) Cost of goods sold and finished goods inventory.
B) Finished goods inventory and work in process inventory.
C) Work in process inventory, finished goods inventory, and cost of goods sold.
D) Work in process inventory.
E) Raw materials inventory, work in process inventory, and finished goods inventory.

Question

Quizplus · Accepted Answer

Overapplied or underapplied overhead should be allocated to all three major inventory accounts (work in process, finished goods, and cost of goods sold) to ensure that the total cost of goods sold and ending inventory are correctly stated.

If Overapplied or Underapplied Overhead Is Material, It Should Be