Holland Woodworking uses normal costing and allocates manufacturing overhead to jobs based on a budgeted labor-hour rate and actual direct labor-hours. Under- or overallocated overhead, if immaterial, is written off to cost of goods sold. During 2014, Holland recorded the following:

1. Compute the budgeted manufacturing overhead rate.
2. Prepare the summary journal entry to record the allocation of manufacturing overhead.
3. Compute the amount of under- or overallocated manufacturing overhead. Is the amount significant enough to warrant proration of overhead costs, or would it be permissible to write it off to cost of goods sold? Prepare the journal entry to dispose of the under- or overallocated overhead.

Transcribed Image Text:

Budgeted manufacturing overhead costs Budgeted direct labor-hours Actual manufacturing overhead costs Actual direct labor-hours $4,400,000 200,000 $4,650,000 212,000