Applied Overhead of a Company Exceeds Actual Overhead When the

question 10

Multiple Choice

Applied overhead of a company exceeds actual overhead when the

• A)Overhead account has a credit balance.
• B)journal entry to account for the difference involves a debit to Cost of Goods Sold.
• C)Overhead account has a debit balance.
• D)company has overspent in the overhead cost area.

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Definitions:

Gross Margin

The difference between sales revenue and cost of goods sold, expressed as a percentage of sales revenue, indicating the efficiency of a company in managing its production costs.

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects revenue by comparing net credit sales to the average accounts receivable over a period.

Inventory Turnover

A ratio that shows how often a company's inventory is sold and replaced over a specific period, indicating efficiency in managing stock levels.

Capital Structure

The combination of a business's long-term loans, particular short-term borrowings, common stock, and preferred stock, employed to fund its general activities and expansion.