Underapplied and Overapplied Overhead Is Not Usually Required to Be

question 58

Multiple Choice

Underapplied and overapplied overhead is not usually required to be adjusted in service costing systems. Why?

• A) It is immaterial.
• B) The costing system is not integrated with the accounting system.
• C) Underapplied and overapplied overhead has no impact on decision making.
• D) It does not affect the accuracy of the service costs.

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Definitions:

Principal

A person for whom another person, called the agent, is performing some act.

Asymmetric Information

A condition in which one party in a transaction has more or superior information compared to another, potentially leading to an imbalance in the transaction.

Buyer

An individual or entity that purchases goods or services from another entity, typically in the context of an economic market.

Seller

An individual or business that offers goods or services for sale to consumers or other businesses.