After posting all actual factory overhead and applying factory overhead to production departments in a process costing system,
A) There will never be underapplied overhead.
B) There will never be overapplied overhead.
C) There will always be underapplied overhead.
D) There will always be overapplied overhead.
E) There may be over or underapplied overhead.

Question

Quizplus · Accepted Answer

Over or underapplied overhead can occur when the actual overhead costs incurred do not match with the overhead costs allocated to the production departments. This can happen due to various reasons such as incorrect estimates of overhead costs, changes in production levels, and differences between actual and budgeted overhead rates. Hence, there may be over or underapplied overhead even after posting all actual factory overhead and applying factory overhead to production departments in a process costing system.

After Posting All Actual Factory Overhead and Applying Factory Overhead