Question

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The adjustment for overhead that is over- or under-allocated can occur in Work in Process in Cost of Goods Sold

The adjustment for overhead that is over- or under-allocated can occur

in Work in Process

in Cost of Goods Sold

in Finished Goods, Cost of Goods Sold, or Work in Process

in Cost of Goods Sold and Work In Process, but not in Finished Goods

in Finished Goods Inventory

Solutions

Expert Solution

The adjustment for overhead that is over or under allocated can occur in Option C - In finished goods, Cost of goods sold or Work in process account. The overheads over applied or under applied can be adjusted and closed at year end to any of the Finished goods, cost of goods sold or the work in process account. Hence, all 3 accounts are valid and Option C is the correct answer.

 

Option A, Option B and Option E are accounts where over or under applied overheads can be adjusted but since there is another option which includes all these 3, that option is correct.

 

Option D is incorrect as over or under applied overheads can be closed to Finished goods inventory account also.

Option D is incorrect as over or under applied overheads can be closed to Finished goods inventory account also.

Nabeel answered 1 year ago
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