Under What Circumstance Should the Amount of Overallocation or Underallocation

question 135

Multiple Choice

Under what circumstance should the amount of overallocation or underallocation be reflected as an adjustment to cost of goods sold?

• A) In all circumstances
• B) If most of the inventory produced during the period has not been sold
• C) Under no circumstance
• D) If most of the inventory produced during the period has been sold

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Definitions:

Average Fixed Cost

The total fixed costs of production divided by the quantity of output produced, illustrating how fixed costs dilute over larger quantities of output.

Total Cost

The total expense incurred in the production of goods or services, including both fixed and variable costs.

Computer Software

Software and data that enable a computer to execute particular tasks.

Opportunity Cost

The sacrifice of possible benefits from other options when selecting a specific one.