Budgeted manufacturing overhead costs $4,800,000 Overhead allocation base Machine-hours Budgeted machine-hours Manufacturing overhead costs incurred 80,000 $4,900,000 Actual machine-hours 75,000 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 $8,000,000 Finished Goods Control 11,000 1,250,000 Work-in-Process Control 4,000 750,000 1. Compute the budgeted manufacturing overhead rate for 2017. 2. Compute the under- or overallocated manufacturing overhead of Zaf 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. Required
Budgeted manufacturing overhead costs $4,800,000 Overhead allocation base Machine-hours Budgeted machine-hours Manufacturing overhead costs incurred 80,000 $4,900,000 Actual machine-hours 75,000 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 $8,000,000 Finished Goods Control 11,000 1,250,000 Work-in-Process Control 4,000 750,000 1. Compute the budgeted manufacturing overhead rate for 2017. 2. Compute the under- or overallocated manufacturing overhead of Zaf 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. Required
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Proration of overhead. (Z. Iqbal, adapted) The Zaf Radiator Company uses a normal-costing system with a single
Transcribed Image Text:Budgeted manufacturing overhead costs
$4,800,000
Overhead allocation base
Machine-hours
Budgeted machine-hours
Manufacturing overhead costs incurred
80,000
$4,900,000
Actual machine-hours
75,000
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
$8,000,000
Finished Goods Control
11,000
1,250,000
Work-in-Process Control
4,000
750,000
Transcribed Image Text:1. Compute the budgeted manufacturing overhead rate for 2017.
2. Compute the under- or overallocated manufacturing overhead of Zaf 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.
Required
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