What is the best theoretical method of allocating underapplied or overapplied overhead, assuming that the objective is to obtain as accurate a cost application as possible?

To understand the process of under and over applied knocks it is subjective that the process for job- liveing is understood. The basic flow of bell in a job- rescript system begins by recording the be of material, prod, and manufacturing command processing overhead time. The pulmonary tuberculosis of soaking up costing to provide quotes for jobs takes distinguish of twain fixed and versatile costs. (1) Material and direct labor costs are debited to the Work in mental process inventory. Any indirect material or indirect labor costs are debited to the Manufacturing Overhead inventory, (which is a temporary regard account), along with any other tangible manufacturing overhead costs incurred during the period. Manufacturing overhead is applied to Work in handle utilise a predetermined footstep. The offsetting mention institution is to the Manufacturing Overhead overlook account, any discrepancy between overhead costs incurred and overhead costs applied shows up as a residuum in the Manufacturing Overhead control account at the give up of the period. (2) Since the predetermined overhead point is based entirely on estimated data, there will or so always be a difference between the existent amount of overhead cost incurred and the amount of overhead cost that is applied to the Work In work on inventory A debit counter residuum is called underapplied overhead and a credit balance is called overapplied overhead, and can be determined by the termination balance in the Manufacturing Overhead control account. An underapplied balance occurs when more than overhead cost is actually incurred than is applied to the Work in Process inventory. An overapplied balance results from applying more overhead to Work in Process than is actually incurred. When a predetermined overhead rate is used, it is mistaken that the overhead cost is variable. (3) Another approach is to portion the under- or overapplied balance to Cost of Goods Sold and to the Wor k in Process and... ! If you want to get a full essay, order it on our website: OrderEssay.net

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