If the amount of underapplied or overapplied overhead is immaterial, it can be charged to cost of goods sold. However, if the amount is material, it is prorated among work in process and finished goods inventories and cost of goods sold.
Underapplied or overapplied overhead is never allocated only to finished goods inventory.
The treatment of the underapplied or overapplied overhead depends on the materiality of the amount. If it is immaterial it can be moved to cost of goods sold. If it is material, it is apportioned among work in process inventory, finished goods inventory, and cost of goods sold.
If the amount is material, the underapplied or overapplied overhead is apportioned to work in process inventory, finished goods inventory, and cost of goods sold.
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