Question

Sundance Solar Company operates two factories. 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 March 1	$1,450,400	$800,250
Estimated direct labor hours for year		24,250
Estimated machine hours for year	51,800
Actual factory overhead costs for March	$116,120	$98,220
Actual direct labor hours for March		2,920
Actual machine hours for March	4,200

Required:

	a. Determine the factory overhead rate for Factory 1.
	b. Determine the factory overhead rate for Factory 2.
	c. Journalize the Mar. 31 entries to apply factory overhead to production in each factory. Refer to the chart of accounts for the exact wording of the account titles.
	d. Determine the balances of the factory overhead accounts for each factory as of March 31, and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead.

Step One Journalize the Mar. 31 entry to apply factory overhead to production in Factory 1. Refer to the Chart of Accounts for exact wording of account titles. Scroll down to record the entry for Factory 2.  
Step two: Now journalize the second Mar. 31 entry to apply factory overhead to production in Factory 2. Refer to the Chart of Accounts for exact wording of account titles.

a. Determine the factory overhead rate for Factory 1.

$__________per machine hour

b. Determine the factory overhead rate for Factory 2.

$______________ per direct labor hour

Sundance Solar Company operates two factories. 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 March 1	$1,450,400	$800,250
Estimated direct labor hours for year		24,250
Estimated machine hours for year	51,800
Actual factory overhead costs for March	$116,120	$98,220
Actual direct labor hours for March		2,920
Actual machine hours for March	4,200

Required:

	a. Determine the factory overhead rate for Factory 1.
	b. Determine the factory overhead rate for Factory 2.
	c. Journalize the Mar. 31 entries to apply factory overhead to production in each factory. Refer to the chart of accounts for the exact wording of the account titles.
	d. Determine the balances of the factory overhead accounts for each factory as of March 31, and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead.

X

Chart of Accounts

CHART OF ACCOUNTS
Sundance Solar Company
General Ledger
ASSETS 110 Cash 121 Accounts Receivable 125 Notes Receivable 126 Interest Receivable 131 Materials 132 Work in Process 133 Factory Overhead 134 Finished Goods 141 Supplies 142 Prepaid Insurance 143 Prepaid Expenses 181 Land 191 Factory 192 Accumulated Depreciation-Factory LIABILITIES 210 Accounts Payable 221 Utilities Payable 231 Notes Payable 236 Interest Payable 241 Lease Payable 251 Wages Payable 252 Consultant Fees Payable EQUITY 311 Common Stock 340 Retained Earnings 351 Dividends 390 Income Summary	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Goods Sold 520 Wages Expense 531 Selling Expenses 532 Insurance Expense 533 Utilities Expense 534 Office Supplies Expense 540 Administrative Expenses 560 Depreciation Expense-Factory 590 Miscellaneous Expense 710 Interest Expense

X

Factory Overhead Rates

a. Determine the factory overhead rate for Factory 1.

per machine hour

b. Determine the factory overhead rate for Factory 2.

per direct labor hour

X

Journal

c. Journalize the Mar. 31 entry to apply factory overhead to production in Factory 1. Refer to the Chart of Accounts for exact wording of account titles. Scroll down to record the entry for Factory 2.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2

Now journalize the second Mar. 31 entry to apply factory overhead to production in Factory 2. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2

X

Final Question

d. Determine the balances of the factory overhead accounts for each factory as of March 31, and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead.

Answer 1

Above question is about determination of overhead rate based on machine hours and direct labor hours. And application of overhead to respective factory. Refer the below images for the above mentioned questions, in a detailed way of solution.

Realvirement : Determine the factory overhead rate for factory 1. = overhead rate (factory ) Estimated factory overhead lost Estimated Machine hoors - $14.50400 Sidoo = $28 per Machine hour. the Determine factory overhead rate for factory 2. Requirement = Estimated factory overhead cost factory overhead rate ( Based on direct labor hours) Estimated direct lebor hoors 800250 24250 = 433 per direct labour hour. Reagoirement : overhead Journalize the to production entries in each to apply factory factory for march. particulars Debit credit $ 117600 Factory Work in Go process ale or Factory overhead Al (4200 MAX $28 por MH) $ 17600 o Work in factory 9o process Ale or $96360 Factory overhead All (2920 Labor Hoors &33 per Dt.it) $96366

Working Notes : calcolation of overhead applied to factory ① Actual given Machine overhead rate per hours = 4000 rih = {24 per mit : overhead applied overhead rate - Machine hoursy - 42004 $28 $117600 @ Actual given calculation of overhead applied to factory ③ given direct labour hours = 2920 overhead rate per DLH = $33 per Dutt overhead applied = Labor hours overtead rate - 2920 * $ 33 2996360 Requirement : Determine Deteror the balances of each factory as of March 31, represent overappted factory factory overtead factory overhead and indicate whether werkend (or) accounts for the amounts under appted Factor Actual overhead factory overhead cost (march) = 4 116120 appted (WND) 4 117600 over applied & 1480 Factory (March) Actual factory overhead cost overhead applied (WN) = $98220 - $ 96360 underapplied - $ 1860