Proration of overhead. (Z. Iqbal, adapted) 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 2014:

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

Machine-hours data and the ending balances (before proration of under- or overallocated overhead) are as follows: Actual Machine-Hours 2014 End-of-Year Balance Cost of Goods Sold 60,000 $8,000,000 Finished Goods Control 11,000 1,250,000 Work-in-Process Control 4,000 750,000

1. Compute the budgeted manufacturing overhead rate for 2014. 2. Compute the under- or overallocated manufacturing overhead of Zaf Radiator in 2014. Dispose of this amount using the following: a. Writeoff 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 2014 (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.