The Zaf Radiator Company uses a normal-costing system with a single manufacturing overhead cost pool and machine-hours as the cost-allocation base. The following data are for 2020:

Machine-hours data and the ending balances (before proration of under- or overallocated overhead) are as follows:

Required

1. Compute the budgeted manufacturing overhead rate for 2020.
2. Compute the under- or overallocated manufacturing overhead of Zaf Radiator in 2020. Adjust for this  amount using the following:
a. Write-off to Cost of Goods Sold
b. Proration based on ending balances (before proration) in Work-in-Process Control, Finished Goods
Control, and Cost of Goods Sold
c. Proration based on the overhead allocated in 2020 (before proration) in the ending balances of Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold
3. Which method do you prefer in requirement 2? Explain.

Transcribed Image Text:

Budgeted manufacturing overhead costs Overhead allocation base Budgeted machine-hours Manufacturing overhead costs incurred Actual machine-hours $4,800,000 Machine-hours 80,000 $4,900,000 75,000