Assume That Variable Overhead Is Over Applied by $100 and Fixed

question 127

Multiple Choice

Assume that variable overhead is over applied by $100 and fixed overhead is under applied by $50.The effect on cost of goods sold is

• A)$150 increase.
• B)$150 decrease.
• C)$50 increase.
• D)$50 decrease.

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Definitions:

Liability Account

An accounting record that tracks obligations or debts that a company owes to others, which must be settled over time through the transfer of economic benefits.

Accrual Basis

A bookkeeping approach that recognizes income and expenses at the time they are accrued, rather than when the actual cash transaction occurs.

Adjustments

Modifications made to accounting entries to correct errors or allocate revenues and expenses to the appropriate accounting period.

Match Expenses

The accounting principle that requires expenses to be recorded in the same accounting period as the revenues that are earned as a result of those expenses.