PRC-1 · Chapter 7 · Question 68 of 100
What is the correct journal entry to adjust for 'over-absorbed' production overheads at the end of the period?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Debit Production Overheads & Credit Cost of Sales (P&L)
Explanation
Because too much overhead was absorbed (expense was too high), the correction requires reducing the expense by crediting Cost of Sales (or P&L) and debiting the over-absorbed balance out of the Production Overheads control account.
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