If underapplied factory overhead is immaterial,the account is closed by a debit to Cost of Goods Sold.

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Quizplus · Accepted Answer

If underapplied factory overhead is considered immaterial, then it can be closed directly to Cost of Goods Sold. This is because the amount is small enough that it will not significantly impact the accuracy of the income statement or other financial statements. However, if the amount is considered material, it would need to be prorated among the various accounts affected, such as finished goods, work in progress, and Cost of Goods Sold.

If Underapplied Factory Overhead Is Immaterial,the Account Is Closed by a Debit