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 2016:

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 under allocated or over allocated overhead) are as follows:

Actual Machine-2016 End-of-Year

Hours (MH)Balance

Cost of Goods Sold..............60,000..............................$8,000,000

Finished Goods Control.........11,000..............................1,250,000

Work-in-Process Control..........4,000.................................750,000

Required

1. Compute the budgeted manufacturing overhead rate for 2016.

2. Compute the under allocated or over allocated manufacturing overhead of Naf Radiator in 2016. Dispose of this under allocated or over allocated 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.