Question: The Solar Radiator Company uses a normal costing system with a

The Solar 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 over-allocated overhead) are as follows:

1. Compute the budgeted manufacturing overhead rate for 2012.
2. Compute the under- or overallocated manufacturing overhead of Solar Radiator in 2012. Dispose of this amount using the following:
a. Writeoff 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.

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  • CreatedJanuary 15, 2015
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