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Chaos Manufacturing had the following financial information for the year ended December 3 1 2 0 2 3 : $During the year, the budgeted and

Chaos Manufacturing had the following financial information for the year ended December 312023:
$During the year, the budgeted and actual costs were as follows:
Sales for the year were $1,400,000
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 $8,000 worth of materials were used in the production process but were untraceable.
The rest of the materials used in the production process were directly traceable and applied to WIP as Direct
Materials.
During the year $80,000 worth of raw materials were purchased.
Note 2- Labour
Budget:
Direct Labour $200,000+ Factory Salaries $90,000+ Sales and Marketing Salaries $160,000=$450,000
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, 95% of these costs are related to the factory, and 5% 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
Overhead is applied based on Direct babour costs.
Required:
Part 1
Based on Normal Costing, show the T-accounts for the three Inventory Accounts (Raw Materials, WIP, Finished Goods)
and for Manufacturing Overhead. Prepare an income statement. You may either include the schedules of Cost of Goods
Manufactured and Cost of Goods Sold as part of the Income Statement or as separate schedules.
Part 2
The company is unsure how to treat under/over applied overhead and would like your advice. Calculate the
allocation of under/over applied overhead based on your recommendation.
(Note: when you see a question that asks for advice, the best approach is to (1) first identify each possible option
and then (2) analyze each option by explaining the benefits/drawbacks of each option. Finally, (3) make a
recommendation based on your analysis. darr
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