An approach in which, the over allocated and under allocated is spread in, ending balance of finished goods control, is called ___________?
Correct answer: C. proration approach
- A. allocation approach
- B. unadjusted approach
- C. proration approach
- D. adjusted approach
Explanation
Proration spreads underapplied or overapplied overhead among ending work in process, finished goods, and cost of goods sold balances. This differs from the adjusted approach, which transfers the entire variance to cost of goods sold.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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