Which of the Following Is Correct with Respect to Closing

question 69

Multiple Choice

Which of the following is correct with respect to closing out overapplied manufacturing overhead to Cost of Goods Sold versus closing it out to Cost of Goods Sold and Finished Goods and Work-in-Process inventories?

• A) The balance in the Work-in-Process account after allocation will be higher if the overapplied overhead is closed out by allocating it to all appropriate accounts.
• B) The balance in the Work-in-Process account after allocation will be the same under either method.
• C) Operating income will be higher if all of the overapplied overhead is closed out to Cost of Goods Sold.
• D) Cost of Goods Sold will be lower if the overapplied overhead is closed out by allocating it to the inventory accounts as well as to Cost of Goods SolD.
• Closing an overapplied balance in manufacturing overhead,even prorated to Cost of Goods Sold will cause operating income to be higher.

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Definitions:

Nonsystematic Risk

The part of an investment's risk that is attributable to firm-specific or industry-specific factors and can be mitigated through diversification.

Volatility

A statistical measure of the dispersion of returns for a given security or market index, often used to quantify the risk of the security or market.

Sensitivity

The degree to which a financial asset's price responds to changes in underlying factors, such as interest rates or market volatility.

Systematic

Refers to the risk inherent to the entire market or market segment, which cannot be eliminated through diversification.