If the under- or overapplied overhead amount is considered to be material,which of the following accounts would be the least likely to be used when closing the Manufacturing Overhead account at the end of the period?

Question

Quizplus · Accepted Answer

If the under- or overapplied overhead amount is material, it means there is a substantial difference between the applied and actual overhead costs incurred. In such a case, the Manufacturing Overhead account cannot be closed directly to Cost of Goods Sold because it would distort the cost of goods sold and gross profit figures. Instead, the difference must be allocated among the work in process, finished goods, and cost of goods sold accounts based on their relative sizes.

Raw Materials Inventory is not a likely account to be used in this allocation process because it deals with the purchase and receipt of materials, and not with the manufacturing overhead costs. Therefore, Choice A is the best answer. Choice B, C, and D are all likely accounts to be used in the allocation process because they represent the different stages of the production cycle where overhead costs are incurred. However, none of these choices is the least likely account, so they are not the best answer.

If the Under- or Overapplied Overhead Amount Is Considered to Be