Reference no: EM13600621

Proration overhead. The-Ride-On-Wave 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 2011:
Budgeted manufacturing overhead cost $125,000
Budgeted direct manufacturing labor cost $250,000
Actual manufacturing overhead cost $117,000
Actual direct manufacturing labor cost $228,000

inventory balances on December 31, 2011, were as follows:

• 2011 direct manufacturing
• Account Ending balance labor cost in ending balance
• Work in process $ 50,700 $ 20,520
• Finished goods 245,050 59,280
• Cost of goods sold 549,250 148,200

Required:
1. Calculate the manufacturing overhead allocation rate.
2. Compute the amount under- or overallocated manufacturing overhead.
3. Calculate the ending balances in work in process, finished goods, and cost of goods sold if under- overallocated manufacturing overhead is as follows:
a. written off to cost of goods sold
b. prorated based on ending balances (before proration) in each of the three accounts
c. prorated based on the overhead allocated in 2011 in the ending balances (before proration) in each of the three accounts
4. Which method makes the most sense? Justify your answer.