If applied overhead exceeds actual overhead, cost of goods sold must be reduced by the amount of the overcharge in a job order costing system.

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In a job order costing system, if applied overhead exceeds actual overhead, it indicates that too much overhead was allocated to the cost of goods sold. Therefore, the cost of goods sold must be reduced to reflect the actual overhead costs.

If Applied Overhead Exceeds Actual Overhead, Cost of Goods Sold