Question: The Zaf Radiator Company uses a normal-
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 2017:
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:
Required:
1. Compute the budgeted manufacturing overhead rate for 2017.
2. Compute the under- or overallocated manufacturing overhead of Zaf 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.
Transcribed Image Text:
Actual Machine-Hours 2017 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
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