Factory Overhead Rates and Account Balances Prostheses Industries operates two factories. The manufacturing operations of Factory 1 are machine intensive, while the manufacturing operations of Factory 2 are labor intensive. The company applies factory overhead to jobs on the basis of machine hours in Factory 1 and on the basis of direct labor hours in Factory 2. Estimated factory overhead costs, direct labor hours, and machine hours are as follows: Factory 1 Factory 2 Estimated factory overhead cost for fiscal year beginning August 1 $756,860 $654,000 Estimated direct labor hours for year 10,900 Estimated machine hours for year 18,460 Actual factory overhead costs for August $60,520 $56,450 Actual direct labor hours for August 980 Actual machine hours for August 1,440 a. Determine the factory overhead rate for Factory 1. Round your answer to the nearest cent. per machine hour b. Determine the factory overhead rate for Factory 2. Round your answer to the nearest cent. per direct labor hour c. Determine the factory overhead applied to production in each factory for August. Factory 1 d. Determine the balances of the factory overhead accounts for each factory as of August 31, and indicate whether the amounts represent Coverapplied) or underapplied factory overhead. Factory 1 Factory 2 e. Explain why Factory 1 uses machine hours to allocate factory overhead while Factory 2 uses direct labor hours Factory overhead should be allocated using a base that is related to (causes) the overhead costs incurred. Factory 1 has a manufacturing operation, and Factory 2 has a manufacturing operation. Thus, Factory 1 uses machine hours, and Factory 2 uses direct labor hours to allocate factory overhead