Chaos Manufacturing had the following financial information for the year ended December 31 2021: Inventory Balances: Work in Progress Finished Goods Raw Materials Beginning $ 90,000 Ending $ 50,000 $ 57,000 $75,000 $ 10,000 $ 20,000 During the year, the budgeted and actual costs were as follows: Note Budget Actual Raw Materials 1 200,000 Labour 2 440,000 See note1 418,000 Depreciation Factory Equipment 72,000 72,000 Depreciation Office Equipment 24,000 24,000 Building Rent 3 100,000 100,000 Maintenance Factory Equipment 64,000 40,000 Utilities - Electrical 4 200,000 180,000 Sales Commissions 40,000 40,000 Advertising 25,000 25,000 Shipping 10 5 20,000 17,000 Other information Direct Labour Hours Sales for the year were $1,500,000 Budget Actual 20,000 17,000 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, 80% of these costs are related to the factory, and 20% 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 delivery 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 allocate any under/over applied overhead. Identify which option you chose and why it was chosen.