In computing its predetermined overhead rate, Marple Company inadvertently left its indirect labor costs out of the computation. This oversight will cause:
A) Manufacturing Overhead to be overapplied.
B) the Cost of Goods Manufactured to be understated.
C) the debits to the Manufacturing Overhead account to be understated.
D) the ending balance in Work-in-Process to be overstated.

Question

Quizplus · Accepted Answer

Leaving indirect labor costs out of the predetermined overhead rate calculation will result in lower applied overhead, causing the Cost of Goods Manufactured to be understated.

In Computing Its Predetermined Overhead Rate, Marple Company Inadvertently Left