Delcour Manufacturing budgeted $325,000 and incurred $337,000 of overhead costs in the past year. During the year, it allocated $302,000 to its production. An extract from the company's financial records showed the following account balances:
Allocated MOH in Work-in-Process Inventory..............$ 52,246
Allocated MOH in Finished Goods Inventory.................75,802
Allocated MOH in Cost of Goods Sold.......................173,952
Required
1. Calculate the amount of under allocated or over allocated manufacturing overhead for the year.
2. Prepare the journal entry to dispose of this under allocated or over allocated overhead amount using
a. Immediate write-off to Cost of Goods Sold.
b. Proration based on the manufacturing overhead allocated (before proration) in Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold.
3. Which method do you recommend for this company?