1) Orpa Company produces non-motorized boats. Orpa uses a normal costing system and allocates manufacturing overhead…

1) Orpa Company produces non-motorized boats. Orpa uses a normal costing system and allocates manufacturing overhead costs using direct labor cost. The following data is for 2020:

Budgeted manufacturing overhead cost
$157,500

Budgeted direct manufacturing labor cost
$225,000

Actual manufacturing overhead cost
$172,000

Actual direct manufacturing labor cost
$250,000

 
 Inventory balances on December 31, 2020 were: 

Account
Ending Balance
2020 Direct Labor Hours used in ending balance

Work in Process
$70,000
3,000

Finished Goods
$235,000
7,500

Cost of Goods Sold
$495,000
14,500

*Wage rate for the year was $10 per hour
 
Instructions:
i. Calculate the overhead allocation rate. 
ii. Compute the amount of under or overallocated overhead. 
iii. Calculate the ending balances in work-in-process, finished goods and cost of goods sold if under or overallocated overhead is prorated based on overhead allocated in 2020 in the ending balances (before proration) in each of the three accounts. 
iv. Journalize the adjusting entry to close the balance of under or overallocated overhead.