Naf Radiator Company uses a normal costing system with a single manufacturing overhead (MOH) cost pool and machine hours (MH) as the cost allocation base. The following data are for 2013:

Budgeted manufacturing overhead (MOH)...... $4,800,000

Overhead allocation base......machine hours (MH)

Budgeted machine hours (MH)......... 80,000

Manufacturing overhead (MOH) incurred...... $4,900,000

Actual machine hours (MH)............ 75,000

Machine-hours data and the ending balances (before proration of underallocated or overallocated overhead) are as follows:

REQUIRED
1. Compute the budgeted manufacturing overhead rate for 2013.
2. Compute the underallocated or overallocated manufacturing overhead of Naf Radiator in 2013. Dispose of this underallocated or overallocated amount using:
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 allocated overhead amount (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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Actual Machine Hours (MH) 60,000 11,000 4,000 2013 End-of-Year Balance Cost of Goods Sold Finished Goods Control Work-in-Process Control S8,000,000 1,250,000 750,000