Question

2. The following account appears in the ledger after only part of the postings have been completed for July the first month of the current fiscal year: Work in Process July | Balance 28.200 Direct materials2 74. CCO Direct labor 152,000 Factory overhead is applied to jobs at the rate of 40% of direct labor cost. The actual factory overhead incurred for July was $58,000. Jobs completed during the month totaled $298,200. (a) What is the balance of the factory overhead account on July 317 (b) Was factory overhead over applied or under applied on July 31? c) Determine the balance of Work in Process on July 31.

Answer 1

a) Factory overhead rate = 40 % of Direct labor cost

Direct Labor Cost = $ 152,000

Factory overhead applied = Direct Labor Cost x Factory overhead rate

= 152,000 x 40 %

= $ 60,800

Actual Factory overhead = $ 58,000

Balance of factory overhead account = factory overhead applied - Actual Factory overhead

= 60,800 - 58,000

= $ 2,800

B) Since factory overhead applied was more than actual factory overhead , hence factory overhead was over applied.

C) Work in Progress

Total Balace	28,200	Finished Goods	298,200
Direct Material	274,000
Direct Labor	152,000
Factory Overhead Applied	60,800
Total Ending Balance	216,800

Balance of work in progress on July 31 = $ 216,800.

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