If manufacturing overhead is underapplied, then:
A) actual manufacturing overhead cost is less than estimated manufacturing overhead cost.
B) the amount of manufacturing overhead cost applied to Work in Process is less than the actual manufacturing overhead cost incurred.
C) the predetermined overhead rate is too high.
D) the Manufacturing Overhead account will have a credit balance at the end of the year.

Question

Quizplus · Accepted Answer

Underapplied manufacturing overhead means that the amount of manufacturing overhead cost applied to Work in Process is less than the actual manufacturing overhead cost incurred. This is because the predetermined overhead rate is based on estimated manufacturing overhead costs, which may differ from the actual manufacturing overhead costs incurred. As a result, the Manufacturing Overhead account will have a debit balance at the end of the year.

If Manufacturing Overhead Is Underapplied, Then