Final answer:
The correct general entry for an immaterial indirect costs variance in a job order costing system is Option 1: Debit Cost of Goods Sold and Credit Manufacturing Overhead. This handles over-applied or under-applied overhead in a manner that adjusts the Cost of Goods Sold accordingly without the need to trace the variance back to specific jobs.
Step-by-step explanation:
When dealing with job order costing and indirect costs, there can be times when variances between the estimated overhead costs and actual overhead costs occur. If such a variance is immaterial, meaning it is too small to significantly impact the company's financial statements, it is common practice to close out the variance directly to the Cost of Goods Sold (COGS). This is because tracing immaterial variances back to specific jobs can be time-consuming and unlikely to affect decision-making. Therefore, the correct journal entry would be to Debit Cost of Goods Sold and Credit Manufacturing Overhead, which corresponds to Option 1: Debit Cost of Goods Sold, Credit Manufacturing Overhead. If the overhead is over-applied, more overhead was allocated to jobs than was actually incurred. This results in a credit balance in the Manufacturing Overhead account, which must be closed to COGS, reducing its expense. Conversely, if the overhead is under-applied, less overhead was allocated than incurred, causing a debit balance, which increases COGS when closed out.