Question

Which of the following are alternative ways to make end-of-period adjustments to dispose of underallocated or overallocated overhead?

1) Proration based on the total amount of indirect costs allocated (before proration) in the ending balances of work in process, finished goods, and cost of goods sold
2) Proration based on total ending balances (before proration) in work in process, finished goods, and cost of goods sold
3) Year-end write-off to Cost of Goods Sold
4) The adjusted allocation rate approach that restates all overhead entries using actual indirect cost rates rather than budgeted indirect cost rates

Answer 1

Alternative ways to make end-of-period adjustments to dispose of underallocated or overallocated overhead are proration based on allocated indirect costs, proration based on ending balances, and year-end write-off to Cost of Goods Sold. option 1,2,3.

Step-by-step explanation:

The alternative ways to make end-of-period adjustments to dispose of underallocated or overallocated overhead are:

1. Proration based on the total amount of indirect costs allocated (before proration) in the ending balances of work in process, finished goods, and cost of goods sold.
2. Proration based on total ending balances (before proration) in work in process, finished goods, and cost of goods sold.
3. Year-end write-off to Cost of Goods Sold.

These methods help adjust for any discrepancies or imbalances in the allocation of overhead costs across different accounts. For example, if overhead costs were underallocated, the proration approaches would distribute the underallocated amount proportionally among work in process, finished goods, and cost of goods sold, while the year-end write-off method would directly reduce it from the cost of goods sold.