Which of the following about using proration to dispose of underapplied or overapplied overhead is correct?
A) Proration is a less accurate method than closing the account to COGS,because it arbitrarily allocates overhead between COGS account,WIP account,and finished goods account.
B) Proration is a less accurate method than closing the account to COGS,because the process affects three accounts rather than just one account.
C) Proration is a more accurate method than closing the account to COGS,because it recognises that over/under estimation of overhead rate affects more than just the COGS account.
D) Proration is a more accurate method than closing the account to COGS,because the potential distortion is spread out over three accounts.

Question

Quizplus · Accepted Answer

Proration is a more accurate method than closing the account to COGS,because it recognises that over/under estimation of overhead rate affects more than just the COGS account. It spreads the adjustment over three accounts, which reflects a more accurate allocation of the actual overhead costs incurred.

Which of the Following About Using Proration to Dispose of Underapplied