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Required

a. ErgoFurn incurred $395,000 in manufacturing overhead in December. Given that expenditure, was manufacturing overhead under- or overapplied for the year? By how much?

b. Why was overhead under- or overapplied for the year?

c. Assume that ErgoFurn closes under- or overapplied overhead to the Cost of Goods Sold account. Prepare the journal entry to close the manufacturing overhead account.

d. Assume that ErgoFurn prorates under- or overapplied overhead to the appropriate accounts. Calculate the allocated amounts and adjust the account balances as needed.

e. Which method of under- or overapplied overhead disposition is more appropriate for ErgoFurn? Why?