Question

The following information is available for Yeezer Company, which produces special-order security products and uses a job order costing system.
  

	April 30				May 31
Inventories
Raw materials	$	44,000			$	54,000
Work in process		10,400				21,700
Finished goods		64,000				37,600
Activities and information for May
Raw materials purchases (paid with cash)						212,000
Factory payroll (paid with cash)						349,000
Factory overhead
Indirect materials						17,000
Indirect labor						82,000
Other overhead costs						122,000
Sales (received in cash)						1,420,000
Predetermined overhead rate based on direct labor cost						70	%

Determine whether there is over or underapplied overhead.

Factory Overhead

Answer 1

Actual factory overheads = Indirect materials + Indirect labor + Other overheads costs

= 17,000 + 82,000 + 122,000

= $221,000

Predetermined overhead rate based on direct labor cost = 70%

Hence, Applied factory overheads = 349,000 x 70%

= $244,300

Since applied factory overhead is more than actual factory overhead, hence factory overhead is over applied.

Over applied factory overheads = Applied factory overheads - Actual factory overheads

= 244,300 - 221,000

= $23,300

Journal

Date	Account title	Debit	Credit
	Factory overhead	23,300
	Cost of goods sold		23,300

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