Adjusted Allocation Rate Approach
This video discusses the adjusted allocation-rate approach in Managerial Accounting.
The adjusted allocation-rate approach is one way of dealing with an overapplied or underapplied manufacturing overhead balance. Manufacturing overhead is overapplied or underapplied when the predetermined overhead rate differs from the actual overhead.
A company using the Adjusted Allocation-Rate Approach would, at the end of a period, determine the actual manufacturing overhead rate and then re-cost each of the jobs that occurred during the period using the actual manufacturing overhead rate. This gets rid of any overapplied or underapplied manufacturing overhead and provides more accurate job-order costing.
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