Question 1 Capital Manufacturing had the following financial information for the year ended December 31 2021: Inventory Balances: Beginning Ending Work in Progress $ 80,000 $ 50,000 Finished Goods $ 67,000 $ 75,000 Raw Materials $ 20,000 $ 20,000 During the year, the budgeted and actual costs were as follows: Note Budget Actual Raw Materials 200,000 See note1 Labour 440,000 418,000 Depreciation Factory Equipment 72,000 70,000 Depreciation Office Equipment 26,000 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 50,000 40,000 Advertising 35,500 25,000 Shipping 5 20,000 17,000 Other information Budget Actual Direct Labour Hours 20,000 17,000 Machining Hours 33,000 30,000 + Sales for the year were $1,700,000 Note 1 - Raw material Budget: 80% of raw materials will likely be traced directly to specific jobs, and the remaining 20% of raw materials will likely related to production but are untraceable to specific jobs Actual: during the year $20,000 worth of materials were untraceable and applied to overhead, and the rest were directly traced and applied to WIP. During the year $200,000 of raw materials were purchasedNote 2 - Labour Budget: Direct Labour of $200,000 + Factory Salaries of $80,000 + Sales and Marketing Salaries of $160,000 = $440,000 Actual: Direct Labour of $170,000 + Factory Salaries of $85,000 + Sales and Marketing Salaries of $163,000 = $418,000 Note 3 - Building Rent The building is only used 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: 10% of budgeted shipping costs were for the delivery of raw materials to the manufacturing facility, and the remaining 90% 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 have chosen and why it was chosen