The Ride- On- Wonder Company (ROW) produces a line of non-motorized boats. ROW uses a normal- costing system and allocates manufacturing overhead using direct manufacturing labor cost. The following data are for 2012: Budgeted manufacturing overhead cost ......... $ 127,050 Budgeted direct manufacturing labor cost ......... $ 231,000 Actual manufacturing overhead cost ........... $ 123,000 Actual direct manufacturing labor cost.......... $ 220,000
Inventory balances on December 31, 2012, were as follows:
Required 1. Calculate the budgeted manufacturing overhead allocation rate. 2. Compute the amount of under- or overallocated manufacturing overhead. 3. Calculate the ending balances in work in process, finished goods, and cost of goods sold if under- and overallocated manufacturing overhead is as follows: a. Written off to cost of goods sold b. Prorated based on the overhead allocated in 2012 in the ending balances ( before proration) in each of the three accounts 4. Which method makes the most sense? Justify youranswer.