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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