Luca Company over-applied manufacturing overhead during 2012.Which one of the following is part of the year end entry to dispose of the over-applied amount assuming the amount is material?

Question

Quizplus · Accepted Answer

When manufacturing overhead is over-applied, it means that the overhead allocated to products was more than the actual overhead incurred. To correct this, the over-applied amount is removed from the accounts where it was initially applied, such as Work in Process Inventory, Finished Goods, and Cost of Goods Sold. Since the amount is material, it is typically prorated among these accounts, including a decrease to Work in Process Inventory.

Luca Company Over-Applied Manufacturing Overhead During 2012