When job costing is in use, under-applied overhead:
A) Represents the cost of manufacturing overhead that relates to unfinished jobs.
B) Is indicated by a credit balance remaining at year-end in the Manufacturing Overhead account.
C) Is closed out at year-end into the Cost of Goods Sold account if the amount is not material.
D) Results when actual overhead costs incurred during a year are less than the amounts applied to individual jobs.

Question

Quizplus · Accepted Answer

Under-applied overhead occurs when the actual overhead costs exceed the applied overhead costs. If the amount is not material, it is typically closed out to the Cost of Goods Sold account at year-end.

When Job Costing Is in Use, Under-Applied Overhead