Disposition of underallocated or overallocated overhead. (J. Watson) Princeton Manu-

1. Underallocated, $35,000 facturing 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:

REQUIRED 1. Calculate the amount of underallocated or overallocated manufacturing overhead for the year.
2. Prepare the journal entry to dispose of this underallocated or overallocated overhead amount using

a. Immediate write-off to Cost of Goods Sold

b. Proration based on ending balances (before proration) in Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold 3. Which method do you recommend for this company?LO1

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Work-in-Process Inventory Finished Goods Inventory $26,000 $37,625 Cost of Goods Sold $86,375