The Heat 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

2017:

Budgeted manufacturing overhead costs	$4,800,000
Overhead allocation base	Machine-hours
Budgeted machine-hours	60,000
Manufacturing overhead costs incurred	$4,900,000
Actual machine-hours	55,000

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

	Actual Machine-Hours	2017 End-of-Year Balance
Cost of Goods Sold	44,000	$12,000,000
Finished Goods Control	9,000	2,625,000
Work-in-Process Control	2,000	375,000

Requirements

1.	Compute the budgeted manufacturing overhead rate for 2017.
2.	Compute the under- or overallocated manufacturing overhead of Heat Radiator in 2017. Dispose of 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 2017 (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.

Requirement 1. Compute the budgeted manufacturing overhead rate for

2017.

Begin by selecting the formula you will use. Then, enter the amounts and calculate the rate.

					Budgeted manufacturing
	Budgeted manufacturing overhead	/	Budgeted machine-hours	=	overhead rate

$4,800,000

/

60,000

=

$80

Requirement 2. Compute the under- or overallocated manufacturing overhead of

Heat

Radiator in

2017.

Begin by selecting the formula you will use. Next, enter the amounts in the formula and compute the under- or overallocated manufacturing overhead. (Use parentheses or a minus sign when entering overallocated amounts.)

					Manufacturing overhead
	Manufacturing overhead incurred		Manufacturing overhead allocated	=	underallocated (overallocated)

$4,900,000

$4,400,000

=

$500,000

a. Dispose of this amount using a write-off to Cost of Goods Sold. Show the account balances after the write-off.

	Account Balance
	After Proration
Cost of Goods Sold	$12,500,000
Finished Goods Control	2,625,000
Work-in-Process Control	375,000

b. Dispose of the amount using a proration based on ending balances (before proration) in Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold. Begin by selecting the formula to calculate the adjustment to each account. Then enter the amounts in the formula. (Enter the proportions as a decimal to three decimal places, "X.XXX". Use a minus sign or parentheses to show overallocated amounts and adjustments to be subtracted.)

Proportion (decimal)

x

(Over-) Underallocated OH

=

Adjustment

COGS	0.800	x	$500,000	=	$400,000
FG	0.175	x	500,000	=	87,500
WIP	0.025	x	500,000	=	12,500

Now enter the account balances after the write-off.

	Account Balance
	After Proration
Cost of Goods Sold	$12,400,000
Finished Goods Control	2,712,500
Work-in-Process Control	387,500

c. Dispose of the amount using a proration based on the overhead allocated in

2017

(before proration) in the ending balances of Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold. Begin by selecting the formula to calculate the adjustment to each account. Then enter the amounts in the formula. (Enter the proportions as a decimal to three decimal places, "X.XXX". Use a minus sign or parentheses to show overallocated amounts and adjustments to be subtracted.)

Proportion (decimal)

x

(Over-) Underallocated OH

=

Adjustment

COGS	0.800	x	$500,000	=	$400,000
FG		x	500,000	=
WIP		x	500,000	=

I got all the way to this part, but I am not sure of which percentage to use. Can you show step-by-step of how to calculate the percentage to obtain the answer? Thank you so much. What else is needed? I am trying to figure out the percentage in Part C. It is asking for a percentage in the first entry and then multiplied by 500,000. I want to know how to get the percentage?