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Amount under or overapplied, and effect to cost of goods sold

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At year end, records show that actual overhead costs incurred were $25,870 and the amount of overhead costs applied to production was $27,000. Identify the amount of under- or overapplied overhead, and indicate whether the Cost of Goods Sold account should be increased or decreased to reflect actual overhead costs.

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The amount under or over applied and the effect to cost of goods sold are determined.

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