Spencer Company had overapplied factory overhead of $5,000 last year.Which of the following statements is not true?
A)A higher level of production may have been achieved than budgeted for.
B)The Work in Process account was overcharged for the costs of factory overhead incurred during the period.
C)The actual factory overhead expenses may have been less than budgeted for the operating level achieved.
D)Assuming the amount is not material enough to distort net income,Cost of Goods Sold should be increased by this amount.

Question

Quizplus · Accepted Answer

If the amount of overapplied factory overhead is not significant enough to distort net income, then it should be closed to Cost of Goods Sold. This will effectively reduce the cost of goods sold and increase net income by the same amount. Therefore, Choice D is not a true statement as it suggests that Cost of Goods Sold should be increased by this amount.

Spencer Company Had Overapplied Factory Overhead of $5,000 Last Year