Compute the budgeted manufacturing overhead rate

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Reference no: EM13865038

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 2014:

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 2014 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 2014.

2. Compute the under- or over allocated manufacturing overhead of Zaf Radiator in 2014. 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 2014 (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.

Reference no: EM13865038

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