An overallocation of manufacturing overhead is typically corrected by decreasing Cost of Goods Sold on the income statement.

Question

Quizplus · Accepted Answer

When there is an overallocation of manufacturing overhead, it means that the overhead allocated to the cost of goods sold (COGS) is higher than the actual overhead incurred. Correcting this overallocation typically involves decreasing the COGS on the income statement, which adjusts the expenses downwards and reflects a more accurate cost and profit picture.

An Overallocation of Manufacturing Overhead Is Typically Corrected by Decreasing