Question

Factory Overhead Rates, Entries, and Account Balance

Eclipse 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 August 1	$18,500,000		$44,000,000
Estimated direct labor hours for year				800,000
Estimated machine hours for year		1,250,000
Actual factory overhead costs for August		$1,515,800		$3,606,300
Actual direct labor hours for August				64,500
Actual machine hours for August		105,000

a. Determine the factory overhead rate for Factory 1. Round your answer to two decimal places.
$ per machine hour

b. Determine the factory overhead rate for Factory 2.
$ per direct labor hour

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c. Journalize the entries to apply factory overhead to production in each factory for August. If an amount box does not require an entry, leave it blank.

Factory 1
Factory 2

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

Factory 1	$
Factory 2	$

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Answer 1

a
Factory overhead rate for Factory 1	14.80	per machine hour	=18500000/1250000
b
Factory overhead rate for Factory 2	55.00	per direct labor hour	=44000000/800000
c
Factory 1
Work in Process	1554000		=105000*14.80
Factory Overhead		1554000
Factory 2
Work in Process	3547500		=64500*55
Factory Overhead		3547500
d
Factory 1	38200	Credit	Overapplied	=1554000-1515800
Factory 2	58800	Debit	Underapplied	=3606300-3547500