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16-5 - 16-5 16-12 Factory overhead will be overapplied when...

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16-5 16-12 Factory overhead will be overapplied when the amount of factory overhead applied during a period exceeds the amount of factory overhead incurred during that period. Overapplication can occur when incurred costs are less than expected or when actual production activity is greater than expected. Factory overhead will be underapplied when the amount of factory overhead applied is less than the amount of factory overhead incurred during a period. When factory overhead is under (over)applied, the amount of factory overhead applied to goods manufactured and to goods sold is less than (more than) the actual cost incurred in the production. By adjusting the balance in the Cost of Goods Sold account, a company more accurately reflects the actual cost of manufacturing the goods it sold.
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