Select one: a. The balance in the Work-in-Process account after allocation will be higher if the underapplied 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. None of given ANSWER is correct. d. Operating income will be higher if all of the underapplied overhead is closed out to Cost of Goods Sold. X e. Cost of Goods Sold will be higher if the underapplied overhead is closed out by allocating it to the inventory accounts as well as to Cost of Goods Sold.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Underapplied overhead occurs when a business’s expenses have increased than the budgeted expenses.
For example:- If a business has $50,000 as applied budgeted manufacturing overhead and its actual manufacturing overheads are $60,000. It means $10,000 are underapplied overhead ($60,000 - $50,000).
Option a is the correct option.
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