Denise Ondeyko, CPA is drafting an audit program to test controls over the Purdue Corporation's cost records.

Question:

Denise Ondeyko, CPA is drafting an audit program to test controls over the Purdue Corporation's cost records.

Required:

1. Explain the importance of determining the disposition of overapplied and underapplied overhead. In your explanation, describe how overhead should be treated.

2. List and explain some items that should be included in overhead. What should not be included?

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