After posting all actual factory overhead and applying factory overhead to production departments in a process costing system,
A) there will always be overapplied overhead.
B) there may be over or underapplied overhead.
C) there will always be underapplied overhead.
D) there will never be overapplied overhead.
E) there will never be underapplied overhead.

Question

Quizplus · Accepted Answer

In a process costing system, over or underapplied overhead is possible since it is allocated based on predetermined rates instead of actual costs. The actual amount of overhead incurred may differ from the estimated amount used to calculate the predetermined rate, resulting in over or underapplied overhead at the end of the period.

After Posting All Actual Factory Overhead and Applying Factory Overhead