A company incurred more manufacturing overhead costs than the amount of overhead allocated to these jobs during the year.Which statement is true?

Question

Quizplus · Accepted Answer

When a company incurs more manufacturing overhead costs than the amount allocated to the jobs, it means that overhead is under applied, meaning that the actual overhead costs were more than the estimated overhead costs that were allocated to the jobs. The company would need to make an adjusting entry to increase the cost of goods sold for the under-applied overhead amount. Neither answers A nor B are correct because there is no indication that the company spent more money than it should have, nor that they need to defer any costs to the next period. Answer D is incorrect because if overhead was over-applied, it would mean that the actual overhead costs were less than the estimated overhead costs allocated to jobs.

A Company Incurred More Manufacturing Overhead Costs Than the Amount