The spread of over allocated overhead and under allocated overhead among work in process, finished goods and goods sold cost is classified as __________?
Correct answer: A. proration approach
- A. proration approach
- B. appreciation approach
- C. depreciation approach
- D. adjusted approachCompare Credit Cards
Explanation
Proration distributes underallocated or overallocated overhead among work in process, finished goods, and cost of goods sold. It is an allocation of the difference rather than a depreciation or appreciation adjustment.
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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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