P8.3 (LO 1, 2, 3) AP It was the end of the fiscal year, and Bria was evaluating her company's MOH. Since her company uses normal costing and applies overhead based on direct labor hours, she antic- ipated a difference in the amount of MOH that was applied compared to the amount that was actu- ally incurred. Indeed, there was a difference-and it seemed huge! Here is what she saw within the MOH account, as well as detail from the beginning of the year when the budgeted MOH rate was determined: Budgeted MOH cost $30,000 Budgeted direct labor hours 20,000 hours Actual MOH cost $31,000 Actual direct labor hours 18,000 hours Bria is aware of the following company policy regarding any MOH difference: "any MOH difference that is deemed 'immaterial' should be written off in the current period; any MOH difference that is deemed 'material' should be prorated to the appropriate accounts so as to better approximate actual costs." Bria also has the following additional detail regarding the inventory accounts. Applied MOH Within End. Bal. End. Bal. $ 5,000 DM Inventory WIP Inventory 5,000 $ 2,000 FG Inventory 15,000 5,000 Cost of Goods Sold 80,000 20,000 While she does not yet have a clear understanding of what amount might be considered "material," Bria knows she has to first calculate the MOH balance. Required a. Calculate the budgeted MOH rate for Bria's company. b. Determine whether MOH is under- or overapplied, and by how much. c. Since Bria is unsure if this amount would be considered material or not, she decides to do the work for both options so that she can bring it to her supervisor and ask for additional clarification regard- ing materiality. (For the following, round any rates or proportions to four decimal places, and round final dollar amounts to the nearest dollar.) 1. Show the journal entry if the MOH difference is to be written off entirely in the current period. 2. Show the calculations and journal entry needed if the difference is to be prorated to the appro- priate inventory and cost accounts based on their ending balances. 3. Show the calculations and journal entry needed if the difference is to be prorated to the appropriate inventory and cost accounts based on the amount of applied MOH in each account. d. After going to her supervisor with the above work, Bria finds out that the company considers an MOH difference to be "material" if it is greater than 5% of the actual MOH cost for that period (anything less is considered immaterial). Based on this threshold, which of the above options should Bria use this year? Explain the advantages and disadvantages of each option.