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If Manufacturing Overhead has a debit balance at the end of the period then
A) overhead has been underapplied.
B) the overhead assigned to Work in Process Inventory is more than the overhead incurred.
C) overhead has been overapplied.
D) management must take corrective action.
Underapplied Overhead
The situation where the allocated overhead costs are less than the actual overhead costs incurred.
Debit Balance
An accounting entry that indicates the amount owed by a company, typically found on the left side of a ledger.
Work in Process Inventory
The value of partially completed goods that are still in the production process at a given point in time.
- Develop an understanding of the fundamentals surrounding applied, actual, overapplied, and underapplied manufacturing overhead.
- Examine how over or underallocation of overhead affects financial statements.
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Learning Objectives
- Develop an understanding of the fundamentals surrounding applied, actual, overapplied, and underapplied manufacturing overhead.
- Examine how over or underallocation of overhead affects financial statements.
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