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Why is it important to adjust Cost of Goods Sold for under/over applied manufacturing overhead? Identify...

Why is it important to adjust Cost of Goods Sold for under/over applied manufacturing overhead?


Identify the four level hierarchy that in which costs are grouped while creating an Activity-Based Costing System. Choose a manufacturing company and identify three types of costs that should be included in each category. 


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Answer #1

As per policy, only one question is allowed to answer at time, so answering Q1 here :

Answer 1)

It is always important to adjust the under or over applied manufacturing overhead to the Cost of Goods Sold (COGS) because all jobs/products have to appear in COGS sooner or later. So for simple adjustment of this small part of overhead and for the better use of managerial and accounting time and their efforts it should be adjusted to COGS than going for some other method.

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