The Most Common Method for Disposing of Over or Underapplied

question 47

Multiple Choice

The most common method for disposing of over or underapplied overhead is to:

• A)recalculate the overhead rate for the period.
• B)recalculate the overhead rate for the next period.
• C)make a direct adjustment to Work in Process Inventory.
• D)make a direct adjustment to Cost of Goods Sold.

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Definitions:

Receivables

Money owed to a company by its customers or other parties for goods or services that have been delivered but not yet paid for.

Older Accounts

Refers to accounts receivable that have been outstanding for a longer period, often categorized by how long they have been unpaid (e.g., 30 days, 60 days).

Aging of Receivables Method

This is an accounting technique used to estimate uncollectible receivables by analyzing and classifying accounts receivable according to their age.

Accounts Receivable Turnover

A financial ratio that measures how many times a company can turn its accounts receivable into cash during a period.