If actual manufacturing overhead is greater than applied manufacturing overhead, most companies will:
A) Increase Work-in-process, Finished Goods Inventory, and Cost of Goods Sold
B) Decrease Cost of Goods Sold
C) Increase Finished Goods Inventory
D) Increase Cost of Goods Sold

Question

Quizplus · Accepted Answer

When actual manufacturing overhead is greater than applied manufacturing overhead, it indicates that not enough overhead was applied to products. To correct this, companies typically increase the Cost of Goods Sold to account for the underapplied overhead.

If Actual Manufacturing Overhead Is Greater Than Applied Manufacturing Overhead