Overapplied factory overhead that is immaterial in amount is closed to cost of goods sold at year end.

Question

Quizplus · Accepted Answer

When the amount of overapplied factory overhead is immaterial, it is closed to cost of goods sold at the end of the year. This is because the overapplied amount is not significant enough to affect the overall financial statements. However, if the amount is material, it would be prorated and allocated to work in process, finished goods, and cost of goods sold, based on the amount of overhead applied to each account during the year.

Overapplied Factory Overhead That Is Immaterial in Amount Is Closed