If the amount of overapplied or underapplied manufacturing overhead is relatively large, most companies will generally make an adjustment to

Question

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If the amount of overapplied or underapplied manufacturing overhead is relatively large, it is best to allocate the amount to Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold. This allocation will ensure that the costs are properly accounted for in each of the inventory accounts and in the cost of goods sold at the end of the accounting period. Adjusting only one account could result in inaccurate financial statements. Therefore, choice D is the best option.

If the Amount of Overapplied or Underapplied Manufacturing Overhead Is