In a normal costing system, an immaterial amount of overapplied overhead is allocated 100% to:
A) Work in process
B) Finished goods
C) Retained earnings
D) Cost of goods sold

Question

Quizplus · Accepted Answer

In a normal costing system, overapplied overhead occurs when the allocated overhead is greater than the actual overhead incurred. Since the amount is immaterial, it will not have a significant impact on the overall cost of production. Therefore, this amount is allocated to Cost of Goods Sold, which is considered a catch-all account for any small variances in the actual cost of production.

In a Normal Costing System, an Immaterial Amount of Overapplied