Which of the Following About Using Proration to Dispose of Underapplied

question 49

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 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:

Excise Tax

A tax imposed on specific goods, services, or transactions, often included in the price of products like tobacco, alcohol, and fuel, to generate revenue or discourage consumption.

Price Elasticity

A measure of the responsiveness of the quantity demanded or supplied of a good or service to a change in its price.

Price Elasticity

An indicator of the sensitivity of demand for a product to variations in its price.

Relatively Inelastic

Describes a demand characteristic where a change in price leads to a smaller proportionate change in quantity demanded.