alleryStart learning →Which account is never used when estimated factory overhead is adjusted to the actual amount?
AThe Work in Process account
BThe Cost of Goods Sold account
CThe Factory Overhead account
DThe Accounts Payable account
Answer & Solution
Correct answer: A. The Work in Process account
1. The reconciliation happens weeks or months after the goods were made and sold.
2. By then the job costs have already moved through Work in Process, so that account is left alone.
3. Cost of Goods Sold is debited or credited for the difference, against Factory Overhead.
4. If the gap between estimated and actual is unusually large, the estimate itself should be revised for the future.
5. So Work in Process is the account that stays out of the entry.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 2.2 Comprehensive Example of Job Order Costing Transactions for a Manufacturing Company_
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