Chapter 4, Problem 4.39P

Proration of overhead. (Z. Iqbal, adapted) The Zaf 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	$4,800,000
Overhead allocation base	Machine-hours
Budgeted machine-hours	80,000
Manufacturing overhead costs incurred	$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. 1. Compute the budgeted manufacturing overhead rate for 2017.

  Required

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