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.

Actual Machine-Hours2012 End-of-Year Balance Cost of Goods Sold Finished Goods Control Work-in-Process Control 60,000 12,000 8,000 $8,500,000 1,000,000 500,000