3.14 Proration of overhead. IZ. lqbal, adapted) (20 minutes) Ti-Enne Srl uses a normal costing system with a single manufacturing overhead cost pool and 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 4 800000 Machine-hours 80000 4300000 75000 Machine-hours data and the closing balances (before proration of underallocated or over- allocated overhead) are as follows: Actual machine-hours 2007 end-of-year balance Cost of Goods Sold Finished Goods Work in Progress 60000 11000 4000 8000000 1250000 750000 Required 1 Calculate the budgeted manufacturing overhead rate for 2007. 2 Calculate the under- or overallocated manufacturing overhead of Ti-Enne in 2007. Prorate this under- or overallocated amount using a Immediate write-off to Cost of Goods Sold b Proration based on closing balances (before proration) in Work in Progress, Finished Goods and Cost of Goods Sold c Proration based on the allocated overhead amount (before proration) in the closing balances of Work in Progress, Finish ed Goods and Cost of Goods Sold. 3 Which proration method do you prefer in requirement 3? Explain