Which One of the Following Is True Concerning Immaterial Under-Applied

question 85

Multiple Choice

Which one of the following is true concerning immaterial under-applied overhead at year end?

• A)It is subtracted from Cost of Goods Sold.
• B)It is debited to Cost of Goods Sold.
• C)It is reported as an inventory account in the Balance Sheet.
• D)It is added to the Manufacturing Overhead account.

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Definitions:

Operational Cycle

The period between the acquisition of inventory by a company and the collection of payments for the goods or services sold.

Accounts Payable Period

The time between receipt of inventory and payment for it.

Cash Cycle

The period between the outflow of cash for the purchase of raw materials and the inflow of cash from the sale of goods or services, reflecting the time it takes for a business to convert its investment in inventory back into cash.

Accounts Receivable Period

The amount of time it takes for a company to collect payment from its customers after a sale has been made, indicative of the company's efficiency in collecting its receivables.