Which of the Following About Using Proration to Dispose of Underapplied

question 88

Multiple Choice

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 the 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.

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Definitions:

Court Summons

An official notice calling someone to court to respond to a lawsuit filed against them.

Collection Agency

A business that pursues payments on debts owed by individuals or businesses.

Business Practices Act

Legislation aimed at preventing unfair or deceptive business practices and promoting fair competition.

Breach

Breach is the violation or non-fulfillment of a legal obligation, agreement, or contract, which could lead to legal action or penalties against the party at fault.