Over- and underapplied overhead variances are typically allocated among:
A) direct materials, direct labor, and manufacturing overhead.
B) raw materials, work-in-process, and finished goods inventory.
C) the inventory accounts and cost of goods sold.
D) the inventory and human resources-related accounts.

Question

Quizplus · Accepted Answer

Over- and underapplied overhead variances are allocated among the inventory accounts (raw materials, work-in-process, and finished goods) and cost of goods sold. This is done to adjust the inventory values to their actual cost and to recognize the impact of any under- or overabsorbed overhead on the cost of goods sold. Allocation to direct materials, direct labor, and manufacturing overhead or to the inventory and human resources-related accounts is not appropriate for this purpose.

Over- and Underapplied Overhead Variances Are Typically Allocated Among