The Row-On-Watershed Company (ROW) produces a line of non-motorized boats. ROW uses a normal-costing system and allocates manufacturing overhead using direct manufacturing labor cost. The following data are for 2020:

Inventory balances on December 31, 2020, were as follows:

Required

1. Calculate the manufacturing overhead allocation rate.
2. Compute the amount of under- or overallocated manufacturing overhead.
3. Calculate the ending balances in work in process, finished goods, and cost of goods sold if under- or overallocated manufacturing overhead is as follows:
a. Written off to cost of goods sold
b. Prorated based on ending balances (before proration) in each of the three accounts
c. Prorated based on the overhead allocated in 2020 in the ending balances (before proration) in each of the three accounts
4. Which method would you choose? Justify your answer.

Transcribed Image Text:

Budgeted manufacturing overhead cost Budgeted direct manufacturing labor cost Actual manufacturing overhead cost Actual direct manufacturing labor cost $110,000 $220,000 $117,000 $230,000