In computing its predetermined overhead rate, Brady Company included its factory insurance cost twice. This error will result in
A)the ending balance of Finished Goods to be understated.
B)the credits to the Manufacturing Overhead account to be understated.
C)the Cost of Goods Manufactured to be overstated.
D)the Net Operating Income to be overstateD.

Question

Quizplus · Accepted Answer

Including factory insurance cost twice in the predetermined overhead rate will lead to an overstatement of the Cost of Goods Manufactured because the overhead applied to products will be higher than it should be.

In Computing Its Predetermined Overhead Rate, Brady Company Included Its