The amount of overallocation or underallocation is typically corrected by adjusting cost of goods sold.

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Overallocation or underallocation of manufacturing overhead costs is usually corrected by adjusting the cost of goods sold account in the income statement. This adjustment ensures that the actual manufacturing overhead costs incurred are accurately reflected in the cost of goods sold, which ultimately affects the company's profitability.

The Amount of Overallocation or Underallocation Is Typically Corrected by Adjusting