This method has the ultimate effect of charging the actual overhead to the cost of production. Under this method, an under-absorbed or over-absorbed overhead is apportioned to work-in-progress inventory, finished…

For example, let’s say Willie’s Widgets paid you $300, Wally’s Whatsits paid you $750 and Whitley’s Whosits paid you $200. However, you need to properly credit each customer for their…