For external reporting purposes variances relating to over and under applied overhead should be treated as an expense.

Question

Quizplus · Accepted Answer

For external reporting purposes, variances relating to over and under-applied overhead are typically closed to the cost of goods sold or allocated among the work-in-process, finished goods, and cost of goods sold accounts, thus treated as an expense in the period they occur.

For External Reporting Purposes Variances Relating to Over and Under