Question

The Zef Radiator Company uses a​ normal-costing system with a single manufacturing overhead cost pool and​ machine-hours as the​ cost-allocation base. The following data are for 2017​:

Budgeted Manufacturing Overhead Costs	$ 4,875,000
Overhead Allocation Base	machine-hours
Budgeted machine-hours	75,000
Manufacturing Overhead Costs Incurred	$ 5,125,000
Actual machine-hours	80,000

Machine-hours data and the ending balances​ (before proration of​ under- or overallocated​ overhead) are as​ follows:

	Actual Machine-Hours	2017 End-of-Year Balance
Cost of Goods Sold	60,000	$ 8,500,000
Finished Goods Control	12,000	1,000,000
Work-in-Process Control	8,000	500,000

Question:

1.	Compute the budgeted manufacturing overhead rate for 2017.
2.	Compute the​ under- or overallocated manufacturing overhead of Zef Radiator in 2017. Dispose of this amount using the​ following:
	a.	​Write-off to Cost of Goods Sold
	b.	Proration based on ending balances​ (before proration) in​ Work-in-Process Control, Finished Goods​ Control, and Cost of Goods Sold
	c.	Proration based on the overhead allocated in 2017 (before proration) in the ending balances of​ Work-in-Process Control, Finished Goods​ Control, and Cost of Goods Sold
3.	Which method do you prefer in requirement​ 2? Explain.

Answer 1

please see below pic for calculation showing how these values calculated.