If a company chooses to spread overapplied or underapplied overhead to all the accounts that contain applied overhead, the proration should be based on

Question

Quizplus · Accepted Answer

The proration based on the relative size of the ending balance in each account ensures that the adjustment is proportionate to the scale of each account's activities, providing a more accurate reflection of the actual overhead costs.

If a Company Chooses to Spread Overapplied or Underapplied Overhead