Author Question: What are three possible ways to dispose of underallocated or overallocated overhead costs at the end ... (Read 54 times)

Brittanyd9008

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What are three possible ways to dispose of underallocated or overallocated overhead costs at the end of a fiscal year? Briefly comment on the theoretical correctness or incorrectness of each method.
 
  What will be an ideal response?

Question 2

A(n) ___________________ ___________ system generally consists of both computerized and manual components established to collect, store, and manage data and to provide output information to users.
 Fill in the blank(s) with correct word



bdobbins

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Answer to Question 1

Answer: One way to dispose of underallocated or overallocated overhead costs at the end of a fiscal year would be to prorate the underallocated or overallocated overhead costs to the work-in-process control account, the finished goods control account, and to the cost of goods sold account based on the relative amounts in each account. This is a theoretically correct method since it is reasonable to believe that the underallocated or overallocated overhead costs should attach themselves to the goods as they are produced. A second way to dispose of the underallocated or overallocated overhead costs at the end of a fiscal year would be to adjust the allocation rate based on the actual amounts and reallocate the overhead to completed jobs. This is also a theoretically correct method. A third way is to clear all underallocated or overallocated overhead to the cost of goods sold account. This is not theoretically valid but it is practical if the amount of underallocated or overallocated overhead is not material.

Answer to Question 2

information
management information



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