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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