Which of the Following Is Correct with Respect to Closing

question 146

Multiple Choice

Which of the following is correct with respect to closing out overapplied manufacturing overhead to Cost of Goods Sold versus closing it out to Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold?

• A) The balance in the Work-in-Process account after allocation will be higher if the overapplied overhead is closed out by allocating it to all appropriate accounts.
• B) The balance in the Work-in-Process account after allocation will be the same under either method.
• C) Operating income will be higher if all of the overapplied overhead is closed out to Cost of Goods Sold.
• D) Cost of Goods Sold will be lower if the overapplied overhead is closed out by allocating it to the inventory accounts as well as to Cost of Goods Sold.

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