How do you dispose of under- or over allocated overhead?

1. Adjusted allocation rate approach Here, the indirect cost rate is adjusted to the actual indirect cost rate. Then, all jobs with the allocated indirect cost rate are recomputed. Hence, we go from normal costing --> actual costing. 2. Proration approach Here, the under- or overallocation is spread onto WIP, finished goods or COGS. There are 3 methods of doing so, see lecture 3 slide 30-33. 3. Immediate write-off to COGS approach Method 1 is the most accurate, while method 3 is by far the simplest and will often be the one to use.