Zero Radiator Company uses a normal-costing system with a single manufacturing overhead cost pool and machine-hours as
Question:
Zero 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 2012:
Budgeted manufacturing overhead costs | $4,875,000 | ||||||
Overhead allocation base | Machine hours | ||||||
Budgeted machine-hours | 75,000 | ||||||
Manufacturing overhead costs incurred | $5,125,000 | ||||||
Actual machine-hours | 80,000 | ||||||
Machine-hours data and the ending balances (before proration of under- or overallocated overhead) are as follows | |||||||
Actual Machine-Hours | 2012 End-of-Year Balance | ||||||
Cost of Goods Sold | 60,000 | $8,500,000 | |||||
Finished Goods Control | 12,000 | 1,000,000 | |||||
Work-in-Process Control | 8,000 | 500,000 |
Requirement
1. Compute the budgeted manufacturing overhead rate for2012.
Begin by selecting the formula you will use. Then, enter the amounts and calculate the rate. Compute the budgeted manufacturing overhead rate for 2012
2. Compute the under- or overallocated manufacturing overhead of Zero Radiator in 2012
Dispose of this amount using the following:
a. Write-off to Cost of Goods Sold
b. Proration based on the overhead allocated in 2012(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.
Financial Accounting Information for Decisions
ISBN: 978-1259533006
8th edition
Authors: John J. Wild