Lotus Company's Actual Overhead Is Greater Than the Applied Overhead

question 51

Multiple Choice

Lotus Company's actual overhead is greater than the applied overhead.This difference is deemed immaterial.The company records this by debiting Overhead account and crediting Cost of Goods Sold account.Which of the following is true of Lotus Company?

• A)The company has correctly recorded the difference.
• B)The company's assets are overstated.
• C)The company should have credited Work in Process account for the difference.
• D)The company's Cost of Goods Sold account is understated.

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Definitions:

Utility Maximization

The principle that individuals or firms seek to allocate their resources in a manner that maximizes their satisfaction or utility.

Money Income

Money income is the total amount of money earnings received by an individual or household, including wages, salaries, benefits, and investment income, before any deductions.

Marginal Utility

The additional satisfaction or utility a consumer receives from consuming one additional unit of a good or service.

Consumer Equilibrium

occurs when a consumer has allocated their resources in such a way that maximizes their utility, given their budget constraint.