For Peterson Company,total overhead applied was $35,000,000 at the end of the year.Actual overhead was $35,800,000.Closing over/under applied overhead into cost of goods sold would cause net income to:

Question

Quizplus · Accepted Answer

Since actual overhead ($35,800,000) exceeded the overhead applied ($35,000,000), this indicates an underapplied overhead of ($35,800,000 - $35,000,000) = $800,000. This means that the company did not allocate enough overhead to its products during the year, which will lead to a decrease in net income. To account for the underapplied overhead, the company would add it to the cost of goods sold, which would decrease net income by $800,000. Therefore, the correct answer is option B.

For Peterson Company,total Overhead Applied Was $35,000,000 at the End