Question

When manufacturing overhead is overapplied, what happens to the manufacturing overhead control account?

1) Increases
2) Decreases
3) Remains unchanged
4) Cannot be determined

Answer 1

When manufacturing overhead is overapplied, the manufacturing overhead control account decreases, as the excess is cleared out by closing it to COGS or another account.

Step-by-step explanation:

When manufacturing overhead is overapplied, it means that the overhead allocated to jobs during the period is more than the actual overhead incurred. The overapplication of overhead results in a decrease in the manufacturing overhead control account. This occurs because, at the end of the period, any overapplied overhead is cleared out of the control account and is typically closed to the Cost of Goods Sold (COGS) or other appropriate accounts. Therefore, the correct answer is 2) Decreases.