Question

Under applied or over applied factory overhead should be _____________.

• A. Carried forward to next year
• B. Shown as an extraordinary item
• C. Apportioned among cost of goods sold and applicable to inventory
• D. Written off

Answer 1

The correct option is C Apportioned among cost of goods sold and applicable to inventory

When the preliminary estimation differ from the actual overheads, the difference may be either under applied or over applied overheads. At the end of the year, the balance whether under applied or over applied overheads must be charged to the manufacturing cost or cost of goods sold. Under applied or over applied factory overheads are apportioned among cost of goods sold and applies to the inventory.