Using Normal Costing to Cost Units of Productions, Steven Harper

question 61

Multiple Choice

Using normal costing to cost units of productions, Steven Harper Co.has gathered the following information: Fixed manufacturing overhead was estimated to be $120,000 for the year.
Actual production was 40,000 units.
Actual fixed manufacturing overhead costs incurred were $125,000.
What is the result of this difference between the estimated fixed overhead and actual fixed overhead?

• A)The difference is expensed as a period cost the way variable costing immediately expenses fixed overhead as a period cost.
• B)The difference is over or under-applied overhead that if immaterial, will be closed out to cost of goods sold at year end.
• C)The difference will be held in inventory and taken to cost of goods sold when the units are sold next year.
• D)There is no difference.

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Definitions:

False Pretenses

A legal term referring to the act of intentionally misrepresenting the truth to obtain property or money from another.

Misdemeanors

Less serious criminal offenses that are punishable by fines or imprisonment for a period of less than one year.

Petty Offenses

Relate to minor legal violations that typically result in a small fine or other minor penalties.

Stock Option Backdating

The practice of setting the grant date of stock options to an earlier time than their actual issuance date, often to benefit the option recipient financially.