Question

Which of the following statements regarding manufacturing overhead allocation is FALSE?

A) It includes all manufacturing costs that cannot be directly traced to a product or service.
B) The costs can be grouped in either a single indirect-cost pool or in multiple indirect-cost pools.
C) Total costs are unknown at the end of the accounting period.
D) Allocated amounts are debited to Work-in-Process.

Answer 1

The statement that is FALSE regarding manufacturing overhead allocation is that total costs are unknown at the end of the accounting period.

The statement that is FALSE regarding manufacturing overhead allocation is C) Total costs are unknown at the end of the accounting period.

In manufacturing overhead allocation, all manufacturing costs that cannot be directly traced to a product or service are included. These costs can be grouped in either a single indirect-cost pool or in multiple indirect-cost pools. Allocated amounts are debited to Work-in-Process. However, the total costs are not unknown at the end of the accounting period. They are known and are used to allocate the overhead costs to the appropriate products or services.