Disposition ofoverhead under/overallocated. (Z. Iqbal, adapted) The ZafRadiator Company uses a single manufacturing overhead cost pool in its job-costing system. It uses a normal-costing system with actual machine-hours as the allocation base. The following data are for 2007:

Budgeted manufacturing overhead Overhead allocation base Budgeted machine-hours Manufacturing overhead incurred Actual machine-hours

$5,760,000 Machine-hours 80,000

$5,880,000 75,000 Machine-hours data and the ending balances (before proration of underallocated or overallo¬

cated overhead) are as follows:

Actual Machine-Hours 2007 End-of-Year Balance Cost of Goods $old Finished Goods Work in Process 60,000 11,000 4,000

$9,600,000 1,500,000 900,000 Required 1. Compute the budgeted manufacturing overhead rate for 2007.

2. Compute the under- or overallocated manufacturing overhead of Zaf Radiator in 2007.

Dispose ofthis under- or overallocated amount using

a. Immediate write-offto Cost of Goods Sold

b. Proration based on ending balances (before proration) in Work-in-Process, Finished Goods, and Cost of Goods Sold

c. Proration based on the allocated overhead amount (before proration) in the ending bal¬

ances ofWork in Process, Finished Goods, and Cost of Goods Sold 3. Which disposition method do you prefer in requirement 3? Explain.