Question

At the end of the year, any balance in the Manufacturing Overhead account is generally eliminated by adjusting

a) Cost of Goods Sold.
b) Raw Materials Inventory.
c) Work In Process Inventory.
d) Finished Goods Inventory.

Answer 1

Any remaining balance in the Manufacturing Overhead account at the end of the year is typically adjusted against Cost of Goods Sold to reflect the true manufacturing costs incurred.

Step-by-step explanation:

At the end of the year, any balance in the Manufacturing Overhead account is generally eliminated by adjusting Cost of Goods Sold (COGS). This is because manufacturing overhead includes all manufacturing costs that are not directly assignable to specific units of products.

These costs can include indirect materials, indirect labor, and other overhead costs related to the production process. When actual overhead costs are different from what was initially applied to products, the difference is closed out to the COGS to ensure that the inventory and cost of sales reflect true costs. If the overhead is underapplied, COGS will increase and vice versa.