If a Company Chooses to Spread Overapplied or Underapplied Overhead

question 67

Multiple Choice

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

• A)the number of accounts.
• B)the relative size of the ending balance in each account.
• C)the account that has had the least overhead applied to it during the month.
• D)the amount of overhead applied to each account during the period.

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Definitions:

Capital Budget

A budget for investments in major physical assets, such as buildings and machinery, expected to provide benefits in the future.

Maintenance Supplies

Items and materials used in the routine care, repair, and upkeep of machinery, buildings, and equipment to ensure operational efficiency and safety.

Supply Planning Process

The proactive method of coordinating assets to optimize the supply of products and services.

Sales Forecast

The process of estimating future sales, based on historical data, industry comparisons, and market analysis, to guide business planning.