Chaos Manufacturing had the following financial information for the year ended December 31 2020:

Chaos Manufacturing had the following financial information for the year ended December 31 2020: Inventory Balances: Work in Progress Finished Goods Raw Materials Beginning $ 90,000 $57,000 $ 10,000 Ending $ 60,000 $ 67,000 $ 20,000 During the year, the budgeted and actual costs were as follows: Note 1 2 3 Raw Materials Labour Depreciation Factory Equipment Depreciation Office Equipment Building Rent Maintenance - Factory Equipment Utilities - Electrical Sales Commissions Advertising Shipping Budget 200,000 440,000 72,000 24,000 100,000 64,000 200,000 40,000 25,000 20,000 Actual ? 418,000 72,000 23,000 100,000 40,000 180,000 46,000 20,000 17,000 4 5 Sales for the year were $1,500,000 Note 1 - Raw material Budget: 90% of raw materials are traced directly to specific jobs, and the remaining 10% of raw materials are related to production but are untraceable to specific jobs Actual: during the year $20,000 worth of materials were untraceable, and the rest were directly traced and applied to WIP. During the year $200,000 of raw materials were purchased Note 2 - Labour Budget: Direct Labour $200,000 + Factory Salaries $80,000 + Sales and Marketing Salaries $160,000 = $440,000 Actual: Direct Labour $170,000 + Factory Salaries $85,000 + Sales and Marketing Salaries $163,000 = $418,000 Note 3 - Building Rent The building is all for the manufacturing facility Note 4 - Utilities Electrical For both budget and actual costs, 90% of these costs are related to the factory, and 10% of these costs are related to the administrative office. Note 5 Shipping Budget: 20% of budgeted shipping costs were for the delivery of raw materials to the manufacturing facility, and the remaining 80% of the shipping costs are for the delivery of finished goods to customers. Actual: All of the shipping costs were for the deliver of finished goods to customer. Note 6-Overhead The manufacturer uses Normal Costing. Overhead is allocated based on Direct Labour costs. The company is unsure how to treat under/over applied overhead. Required: Show T-accounts for the Inventory Accounts (Raw Materials, WIP, Finished Goods) and for Manufacturing Overhead. Prepare an income statement. You may include a schedule of Cost of Goods Manufactured and Cost of Goods Sold as part of the Income Statement or as separate schedules. Explain which options the company can use to allocated allocate under/over applied overhead. Identify which option you chose and why it was chosen