4-30. Poration of 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: Account & Ending balance & }(c) 2011 direct manufacturing 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.

## Step 1: Calculate the Manufacturing Overhead Allocation Rate<br />### The manufacturing overhead allocation rate is calculated using the budgeted figures. It is determined by dividing the budgeted manufacturing overhead cost by the budgeted direct manufacturing labor cost. The formula is:<br />\[<br />\text{Manufacturing Overhead Allocation Rate} = \frac{\text{Budgeted Manufacturing Overhead Cost}}{\text{Budgeted Direct Manufacturing Labor Cost}}<br />\]<br />Substituting the given values:<br />\[<br />\text{Manufacturing Overhead Allocation Rate} = \frac{125,000}{250,000} = 0.5<br />\]<br />This means that for every dollar of direct manufacturing labor cost, $0.50 of manufacturing overhead is allocated.<br /><br />## Step 2: Compute the Allocated Manufacturing Overhead<br />### To find the allocated manufacturing overhead, multiply the actual direct manufacturing labor cost by the manufacturing overhead allocation rate:<br />\[<br />\text{Allocated Manufacturing Overhead} = \text{Actual Direct Manufacturing Labor Cost} \times \text{Manufacturing Overhead Allocation Rate}<br />\]<br />Substituting the given values:<br />\[<br />\text{Allocated Manufacturing Overhead} = 228,000 \times 0.5 = 114,000<br />\]<br /><br />## Step 3: Compare Actual and Allocated Manufacturing Overhead<br />### The actual manufacturing overhead cost is compared with the allocated manufacturing overhead to determine any over- or under-applied overhead:<br />- **Actual Manufacturing Overhead Cost**: $117,000<br />- **Allocated Manufacturing Overhead**: $114,000<br /><br />The difference is:<br />\[<br />\text{Difference} = 117,000 - 114,000 = 3,000<br />\]<br />Since the actual overhead is greater than the allocated overhead, there is an under-applied overhead of $3,000.