Assume That Variable Overhead Is Overapplied by $200 and Fixed

question 56

Multiple Choice

Assume that variable overhead is overapplied by $200 and fixed overhead is underapplied by $100. If these variances are considered immaterial, the effect on cost of goods sold is:

• A) $300 increase
• B) $100 increase
• C) $300 decrease
• D) $100 decrease

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Definitions:

Economic Efficiency

An optimal distribution of resources in an economy, where no one can be made better off without making someone else worse off.

Marginal Cost

Marginal cost is the cost incurred by producing one additional unit of a good or service, reflecting changes in variable cost.

Minimum Acceptable Price

The lowest price at which a seller is willing to sell a product or service, often covering at least the costs of production.

Wages

Payments made to employees based on the hours worked or the amount of work done, often referred to as compensation for labor services rendered.