Henderson Enterprises manufactures and installs home greenhouses. The company uses a normal-costing system with two direct-cost pools, direct materials and direct manufacturing labour, and one indirect-cost pool, manufacturing overhead. In 2016, manufacturing overhead was allocated to jobs at 120% of direct manufacturing labour cost. At the end of 2016, an immaterial amount of underallocated overhead was closed out to cost of goods sold, and the company showed a small loss. Hatfield is eager to impress his new employer, and he knows that in 2017, Henderson's upper management is under pressure to show a profit in a challenging competitive environment because they are hoping to be acquired by a large private equity firm sometime in 2018. Direct materials control, 1/1/2017 Direct materials purchased, 2017 Direct materials added to production, 2017 Work-in-process control, 1/1/2017 Direct manufacturing labour, 2017 Cost of goods manufactured, 2017 Finished goods control, 1/1/2017 Finished goods control, 12/31/2017 Manufacturing overhead costs, 2017 27,000 620,000 580,000 320,000 928,000 2,956,750 290,000 252,720 1,200,000 a. a. 1. Insert the given information in the T-accounts provided. Calculate the following amounts to complete the T-accounts: Direct materials control, 12/31/2017 b. Manufacturing overhead allocated, 2017 c. Cost of goods sold, 2017 2. Calculate the amount of under-or overallocated manufacturing overhead. 3. Calculate Henderson's net operating income under the following: Under- or overallocated manufacturing overhead is written off to cost of goods sold. b. Under- or overallocated manufacturing overhead is prorated based on the ending balances in work in process, finished goods, and cost of goods sold. Hatfield chooses option 3a above, stating that the amount is immaterial. Comment on the ethical implications of his choice. Do you think that there were any ethical issues when he established the manufacturing overhead rate for 2017 back in late 2016? Refer to the IMA Statement of Ethical Professional Practice. 4. Jeffrey Hatfield joined Henderson Enterprises as controller in October 2016. (Click the icon for additional information about Henderson Enterprises.) At the end of 2016, Hatfield decides to adjust the manufacturing overhead rate to 150% of direct labour cost. He explains to the company president that because overhead was underallocated in 2016, this adjustment is necessary. Cost information for 2017 follows: : (Click the icon to view the cost information for 2017.) Henderson's revenue for 2017 was $5,715,000, and the company's selling and administrative expenses were $2,891,000. Required Requirement 1. Insert the given information in the T-accounts below. Calculate the following amounts to complete the T-accounts: (a) Direct materials control, 12/31/2017, (b) Manufacturing overhead allocated, 2017, and (c) Cost of goods sold, 2017. (Abbreviations used: COGM = cost of goods manufactured, COGS = cost of goods sold, Dir = direct, Dir. Matls = direct materials, MOH = manufacturing overhead, and OH = overhead.) Direct Work-in-Process Materials Control Control Bal. Bal. Bal Bal. Finished Goods Manufacturing OH Control Control Bal. Bal. Bal. Bal. Manufacturing OH Allocated Cost of Goods Sold Bal. Bal Bal. Bal. Requirement 2. Calculate the amount of under- or overallocated manufacturing overhead. Manufacturing overhead is by $ Requirement 3a. Calculate Henderson's net operating income under the following: Under- or overallocated manufacturing overhead is written off to cost of goods sold. (Use parentheses or a minus sign for a net operating loss.) written off to cost of goods sold, Henderson's If the under- or overallocated manufacturing overhead net income (loss) would be $ Requirement 3b. Calculate Henderson's net operating income under the following: under-or overallocated manufacturing overhead is prorated based on the ending balances in work in process, finished goods, and cost of goods sold. First determine how much of the under-or overallocated manufacturing overhead will be written off to cost of goods sold. (Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar.) Cost of goods sold will be adjusted by $ Now calculate the net income (loss). (Use parentheses or a minus sign for a net operating loss.) If the under- or overallocated manufacturing overhead is prorated based on the ending balances in work in process, finished goods, and cost of goods sold, Henderson's net income (loss) would be $