Question
Disposition of Underallocated or overallocated overhead-Advanced ARME Company uses a normal-costing system with a single MOH cost pool and MH as the cost-allocation base. The
Disposition of Underallocated or overallocated overhead-Advanced
ARME Company uses a normal-costing system with a single MOH cost pool and MH as the cost-allocation base. The following data for 2022:
Budgeted manufacturing overhead (MOH)$4,800,00
Overhead allocation basemachine-hours (MH)
Budgeted machine-hours (MH)80,000
Manufacturing overhead (MOH) incurred$4,900,000
Actual machine-hours (MH)$75,000
Machine-hours data and the ending balances (before proration of under- or overallocated overhead) are as follows:
Actual Machine-Hours (MH) 2022 End-of-Year Balance
Cost of Goods Sold60,000$8,000,000
Finished Goods Control11,000$1,250,000
Work-in-Process Control4,000$750,000
Required:
1.Compute the budgeted manufacturing overhead rate for 2022
2.Compute the under-or overallocated manufacturing overhead of ARME in 2022. Dispose of this under-or overallocated amount using:
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 allocated overhead amount (before proration) in the ending balances of Work-in-Process Control, Finished Goods Sold.
3.Which method do you prefer in requirement 2? Explain
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