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