Revision Of Departmental Overhead Rates. Files Inc. manufactures metal office cabinets. The company’s sin¬ gle manufacturing plant consists of the Cutting, Assembly, and Finishing Departments. Files Inc. uses departmental rates for applying factory overhead to production and maintains separate factory overhead control and applied factory overhead accounts for each of the three production departments.

The following predetermined departmental factory overhead rates were calculated for the fiscal year end¬ ing May 31, 19B.

Department Rate Cutting. $2.40 per machine hour Assembly. 5.00 per direct labor hour Finishing. 1r60 per direct labor dollar Infomiation regarding actual operations of the plant for the 6 months ended November 30, 19A is as follows:

Department Cutting Assembly Finishing Factory overheadcosts. $22,600 $56,800 $98,500 Machinehours. 10,800 2,100 4,400 Direct laborhours. 6,800 12,400 16,500 Direct labordollars. $40,800 $62,000 $66,000 Based on this experience and updated projections for the last 6 months of the fiscal year, Files Inc. revised its operating budget. Projected data regarding factory overhead and operating activity for each department for the 6 months ending May 31, 19B, are as follows:

Department Cutting Assembly Finishing Factory overheadcosts. $23,400 $57,500 $96,500 Machinehours. 9,200 2,000 4,200 Direct laborhours. 6,000 13,000 16,000 Direct labordollars. $36,000 $65,000 $64,000 Diane Potter, the controller, plans to develop revised departmental factory overhead rates that will be more representative of efficient operations for the current fiscal year ending May 31, 19B. She has decided to combine the actual results for the first 6 months of the fiscal year with the projections for the next 6 months to develop the revised departmental application rates. She then plans to adjust the applied factory overhead accounts for each department through November 19A to recognize the revised application rates. The analysis that follows was prepared by Potter from general ledger account balances as of November 30, 19A.

Direct Direct Factory Account Account Material Labor Overhead Balance Work in Process Inventory. $ 53,000 $ 95,000 $ 12,000 $ 160,000 FinishedGoods. 96,000 176,000 48,000 320,000 Cost of GoodsSold. 336,000 604,000 180,000 1,120,000

$485,000 $875,000 $240,000 $1,600,000 Required:

(1) Determine the balance of the applied factory overhead accounts as of November 30, 19A, before any revi¬ sion for the following departments:

(a) Cutting

(b) Assembly

(c) Finishing ^

(2) Calculate the revised departmental factory overhead rates that Files Inc. should use for the remainder of the fiscal year ending May 31, 19B.

(3) Prepare an analysis that shows how the applied factory overhead account for each production department should be adjusted as of November 30, 19A, and prepare the adjusting entry to correct all general ledger accounts that are affected. (ICMA adapted)