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:

Population

The entire aggregation of items from which samples can be drawn for statistical measurement or inference.

Normal Distribution

A statistical distribution that is uniform around the average, indicating that observations close to the mean are more common than observations distant from the mean.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values; used in finance to quantify the risk of an investment.

Capital Gain

The profit earned from the sale of an asset, such as stocks or real estate, which exceeds its purchase price.