At the end of the accounting period,applied overhead was larger than actual overhead by a material amount.The over-applied overhead should be:
A)Treated as an extraordinary gain.
B)Treated as an extraordinary loss.
C)Apportioned among Work in Process Inventory,Finished Goods Inventory,and Cost of Goods Sold.
D)Ignored;actual overhead is determined only for internal control purposes.

Question

Quizplus · Accepted Answer

Over-applied overhead should be apportioned among Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold in order to bring the ending balances of these accounts in line with the actual overhead incurred during the period. This is done to ensure that the cost of goods sold and the inventory valuations are accurate. Option A and B are not appropriate as over-applied overhead is not considered an extraordinary item. Option D is also incorrect as actual overhead is an important factor in determining the cost of goods sold and inventory valuations.

At the End of the Accounting Period,applied Overhead Was Larger