PRC-1 · Chapter 7 · Question 88 of 100
What is the required journal entry to adjust for 'under-absorbed' production overheads at the end of the accounting period?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Debit Cost of Sales (P&L), Credit Production Overheads
Explanation
Under-absorbed overheads indicate that unallocated actual expenses remain in the overhead control account. These must be written off to the income statement (Debit Cost of Sales) and cleared from the overhead account (Credit Production Overheads).
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