Western Governors University (WGU) ACCT3314 D101 Cost and Managerial Accounting Practice Exam

The sequence in option B accurately reflects the process of accounting for manufacturing overhead costs in a systematic manner. First, budgeting the estimated manufacturing overhead is essential as it provides a planned guideline for expected costs associated with manufacturing operations during a specific period. This step sets the framework for the entire cost accounting process.

Next is recording actual manufacturing overhead, which involves capturing the actual costs incurred in the manufacturing process as they occur. This step is crucial for comparison against the budgeted amounts to analyze variances effectively.

Following this, applying manufacturing overhead to work-in-process is performed. This application is based on the predetermined overhead rate established during the budgeting process, representing how overhead costs are allocated to specific products as they are manufactured. This allocation helps in determining the total cost of production and ensuring that each product bears a fair share of the overhead costs.

Finally, the process involves eliminating any overapplied or underapplied overhead. This adjustment is necessary to reconcile the differences between the applied overhead (based on budgeted rates) and actual overhead incurred. By making this adjustment at the end of the accounting period, the financial statements accurately reflect the actual costs incurred in production.

This structured approach in option B ensures proper tracking and reporting of manufacturing overhead, enabling the management to make informed decisions