If overhead is underapplied, it means that individual jobs have not been charged enough during the year and the cost of goods sold reported is too low.

Question

Quizplus · Accepted Answer

This statement is true. When overhead is underapplied, it means that the actual overhead costs incurred during the year were more than the total overhead costs allocated to the individual jobs. Consequently, the cost of goods sold is understated and the reported net income is overstated.

If Overhead Is Underapplied, It Means That Individual Jobs Have