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
Budgeted direct manufacturing labor cost
Actual manufacturing overhead cost
Actual direct manufacturing labor cost
Inventory balances on December 31, 2020 were:
2020 Direct Labor Hours used in ending balance
Work in Process
Cost of Goods Sold
*Wage rate for the year was $10 per hour
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.