proration approach
appreciation approach
depreciation approach
adjusted approach
Answer is Right!
Answer is Wrong!
The correct answer is A. proration approach.
Proration is the process of allocating a total amount among a number of items in proportion to their relative size. In the context of overhead allocation, proration is used to spread the amount of overhead that is over or under allocated among the work in process, finished goods, and cost of goods sold accounts.
The proration approach is the most common method of allocating overhead. It is simple to understand and implement, and it provides a reasonable estimate of the amount of overhead that should be allocated to each account.
The other options are incorrect.
- Appreciation is an increase in the value of an asset over time. It is not relevant to the question of how to allocate overhead.
- Depreciation is a decrease in the value of an asset over time. It is not relevant to the question of how to allocate overhead.
- Adjusted approach is a method of allocating overhead that takes into account the actual usage of each cost object. It is more complex than the proration approach, but it may provide a more accurate allocation of overhead.