Princeton Manufacturing budgeted $325,000 and incurred $337,000 of overhead costs in the past year. During the year, it allocated $302,000 to its production. An extract from the company’s financial records showed the following account balances:

Allocated MOH in Work-in-Process Inventory ...... $52,246

Allocated MOH in Finished Goods Inventory ...... $75,802

Allocated MOH in Cost of Goods Sold ..........$173,952

REQUIRED

1. Calculate the amount of under-allocated or over-allocated manufacturing overhead for the year.

2. Prepare the journal entry to dispose of this under-allocated or over-allocated overhead amount using.

a. Immediate write-off to Cost of Goods Sold.

b. Proration based on the manufacturing overhead allocated (before proration) in Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold.

3. Which method do you recommend for this company?