Final answer:
The statement is false. Cost of Goods Sold is debited when manufacturing overhead is underapplied, and credited when overhead is overapplied.
Step-by-step explanation:
If a company closes any underapplied or overapplied manufacturing overhead to the Cost of Goods Sold account, then the answer is false: Cost of Goods Sold will be debited if manufacturing overhead is underapplied for the period. When overhead is overapplied, it means that the company has allocated more overhead to their products than what was actually incurred. In this case, to correct the balance, the Cost of Goods Sold account will be credited, not debited, because the amount allocated was too high and needs to be reduced. Conversely, if overhead is underapplied, meaning not enough overhead was allocated to products, the Cost of Goods Sold will indeed be debited to increase the expenses and align them with the actual overhead incurred.
When manufacturing overhead is overapplied, it means that the actual manufacturing overhead costs incurred are less than the amount allocated to the production of goods. In this case, the manufacturing overhead is considered as underapplied.
Underapplied manufacturing overhead is closed to the COGS account, not overapplied manufacturing overhead. Closing underapplied manufacturing overhead to COGS would increase the COGS, as the costs that were not allocated to production are now accounted for as expenses.