The ________ adjusts individual job-cost records to account for underallocated or overallocated overhead.
A) adjusted allocation-rate
B) proration approach
C) write-off to cost of goods sold approach
D) weighted-average cost approach

Question

Quizplus · Accepted Answer

The adjusted allocation-rate method adjusts individual job-cost records by recalculating the predetermined overhead rate based on actual overhead costs incurred and actual activity levels, which leads to a more accurate allocation of overhead costs to jobs. The proration approach involves allocating the underallocated or overallocated overhead cost to all jobs based on their respective overhead applied amounts, which may not accurately reflect the actual usage of overhead resources. The write-off to cost of goods sold approach involves expensing the entire amount of underallocated or overallocated overhead directly to the income statement, which may not be in compliance with generally accepted accounting principles. The weighted-average cost approach is a method of inventory costing that averages the costs of all units available for sale during the period to determine the cost of goods sold and ending inventory.

The ________ Adjusts Individual Job-Cost Records to Account for Underallocated