Question

Budgeted material costs 1,000
Budgeted labor costs 2,000
Budgeted overhead costs 1,500
Actual material costs 900
Actual labor costs 1,800
Actual overhead costs 1,250

1/1 WIP = 0
12/31 WIP = 2

1) Materials 25 Labor 20
2) Materials 15 Labor 32

Compute the overhead allocation rate.
Calculated the ending balance
WIP
COGS
Calculate the under or overallocated overhead.
Calculate theending balances
WIP
COGS
If the overallocated overhead amount is: Written off to COGS
Prorated using the ending balance (before proration) in COGS and WIP control accounts

Which of the methods in requirement 4 would you choose? Explain.