Question

Factory Overhead Rates, Entries, and Account Balance 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 $381,000 $838,400 13,100 Estimated factory overhead cost for fiscal year beginning March 1 Estimated direct labor hours for year Estimated machine hours for year Actual factory overhead costs for March Actual direct labor hours for March Actual machine hours for March 19,050 $30,540 $72,500 1,180 1,490 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 c. Journalize the entries to apply factory overhead to production in each factory for March. Factory 1 Factory 2

Answer 1

solution a) factory overhead rate for factory 1 5 Estimated factory overhead esiimated Machine hours = 381000 / 19050 20 per Machine hown . b) c) factory overhead rate for factory 2 = Estimated factory overhead / Estimaled direct Laboy hours = 838400 / 13100 s 64 per direct Labor how Journal entry for factory 1. : predetermined crate = 20 peor Machine hour. Actual Machine hours = 1490 This applied overhead = 20X14-90 = 29800 Entry will be ? Particulars Debit Credit work in process 29800 29800 (factory overhead Factory 28 overthead appleed = 64 per derect Labor hows X 1180 actoral hower = 75520

The Journal entry would be a Delit Gedit particulars work in process Factory overhead 25500 75500

d) under factory I actual overhead = 30540, Appleed overhead = 29800 , This appleed overhead overhead is Less than actual overhead and so overhead is applied. There will be debit balance. Balance amount = 30540 - 29800 = 740 factory 2, actual overhead = 72500 Applied overhead = 75500. This applied overhead is greater than actual overhead and so overhed is over oppleed. There will be credit balance. Balance 75500 - 72500 = 3000 940 factory 1 factory 2 underappled overs applied 3000