An accountant recently debited Work-in-Process Inventory and credited Manufacturing Overhead at a company that uses normal costing. The accountant was:
A) applying a predetermined overhead amount to production.
B) recognizing receipt of the factory utilities bill.
C) recording a year-end adjustment for an insignificant amount of underapplied overhead.
D) recognizing actual overhead incurred during the period.
E) recognizing the completion of production.

Question

Quizplus · Accepted Answer

This action represents the application of a predetermined overhead rate to allocate manufacturing overhead costs to the Work-in-Process Inventory, which is common in normal costing systems.

An Accountant Recently Debited Work-In-Process Inventory and Credited Manufacturing Overhead