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

The accountant is applying a predetermined overhead amount to production, which is a common practice in normal costing. This calculation is based on estimates made at the beginning of the year, and the overhead cost is allocated to products based on the estimated amount of direct labor or machine hours.

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