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The estimates used to calculate the predetermined overhead rate will virtually always:

A. prove to be correct.
B. result in a year-end balance of zero in the Manufacturing Overhead account.
C. result in overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.
D. result in underapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.
E. result in either underapplied or overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.

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Answer:

The correct answer is E. result in either underapplied or overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.

Explanation:

Default rate is a factor used to distribute the estimated indirect costs during the production process, it should be noted as said before that this rate is calculated before starting production and its result is expressed in pesos ($), quantities (#), or percentages (%) which are multiplied by the level of production carried out in order to apply the portion of the indirect manufacturing costs generated by the support departments to the productive departments.

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