If manufacturing overhead has been underallocated during the period, and most of the jobs produced have been sold, then

Question

Quizplus · Accepted Answer

If manufacturing overhead has been underallocated, it means that the actual overhead costs incurred during the period were higher than the amount allocated to the products produced. As most of the jobs produced have been sold, it means that the cost of goods sold has already been recorded using the underallocated manufacturing overhead. To adjust for the underallocation, the cost of goods sold should be increased to reflect the actual overhead costs incurred. Therefore, choice A is the best answer. Options C and D are not relevant to the issue of underallocated overhead. Option B is incorrect because if cost of goods sold is decreased, it would increase the profit margin which is not true due to the underallocated overhead.

If Manufacturing Overhead Has Been Underallocated During the Period, and Most