underapplied overhead |
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Definition
A situation in which the overhead applied to a work in progress (WIP) product is less than the overhead that the WIP actually incurs. This results in the manufacturing overhead having a debit balance. Underapplied overhead is reported on the balance sheet as a prepaid expense. At the end of the year, underapplied overhead is balanced by creating a debit to Cost of Goods Sold. Opposite of overapplied overhead.
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underapplied overhead is in the Accounting & Auditing and Industries, Manufacturing, & Technology subjects.
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