Scooby Company has applied $567,988 of overhead into production on Jobs in the Work in Process account. Actual overhead at the end of the year is $575,000. What is the adjustment for over or underapplied overhead?

Question

Quizplus · Accepted Answer

To determine the adjustment for over or underapplied overhead, we need to calculate the difference between applied overhead and actual overhead. In this case, the difference is:
$575,000 - $567,988 = $7,012

Since the actual overhead is greater than the applied overhead, we have underapplied overhead. The adjustment is made by increasing the Cost of Goods Sold for the amount of underapplied overhead. Therefore, the correct answer is B, $7012 Underapplied, increase Cost of Goods Sold.

Scooby Company Has Applied $567,988 of Overhead into Production on Jobs