Gene Simmons Company uses normal costing in each of its three manufacturing departments. Manufacturing overhead is applied to production on the basis of direct labor cost in Department A, machine hours in Department B, and direct labor hours in Department C. In establishing the predetermined overhead rates for the current year, the following budgeted data was available:

A B C

Manufacturing Overhead $900,000 $840,000 $760,000

Direct Labor Cost $600,000 $100,000 $600,000

Direct Labor Hours 50,000 40,000 40,000

Machine Hours 100,000 120,000 125,000

The following actual information is available for January of the current year for each department:

Direct Materials Used $92,000 $86,000 $64,000

Direct Labor Cost $48,000 $35,000 $50,400

Manufacturing Overhead $76,000 $75,000 $72,100

Direct Labor Hours Used 4,000 3,500 4,200

Machine Hours Used 8,000 10,500 12,600

REQUIRED:

A. What two disadvantages are associated with actual costing? How does normal costing "solve" these problems?

B. Compute the pre-determined overhead rate for the current year for each department.

C. Compute the manufacturing overhead applied in January in each department.

D. Compute under- or over-applied overhead at the end of January in each department--be sure to label the amount as under- or over-applied.

E. How will the balance of the Factory Overhead account of each department be reported on the financial statements at the end of (1) January and (2) the year?