When the amount of over-underapplied manufacturing overhead is large,the Manufacturing Overhead account is generally closed out to:
A)Cost of Goods Sold
B)Work-in-Process Inventory
C)Cost of Goods Manufactured
D)Finished Goods Inventory,Work-in-Process Inventory,and Cost of Goods Sold

Question

Quizplus · Accepted Answer

When the over- or underapplied manufacturing overhead is large, it suggests that the actual manufacturing overhead incurred during the period is significantly different from the applied overhead based on the predetermined overhead rate. Therefore, the Manufacturing Overhead account needs to be closed out to Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold based on the amount of overhead applied to those accounts during the period. This way, the over- or underapplied overhead can be allocated to the relevant accounts and properly reflect the cost of goods sold in the income statement. Therefore, the correct choice is D.

When the Amount of Over-Underapplied Manufacturing Overhead Is Large,the Manufacturing