Question

On March 31, 2017, Alpha Corporation recorded the following factory overhead costs incurred:

            Factory Manager Salary                  $6,000

            Factory Utilities                                   2,500

            Machinery Deprecation                    10,000

            Machinery Repairs                             2,000

            Factory Insurance (prepaid)              1,000

The overhead application rate is based on direct labor hours.  The preset formula for overhead application estimated that $21,000 would be incurred, and 10,000 direct labor hours would be worked. During March, 7,100 hours were actually worked on Job Order A-2 and 3,000 hours were actually worked on Job Order A-3. Use this information to prepare the March 31 General Journal entries for the: (round any final dollar answers to the nearest whole dollar):

            1. allocation of factory overhead to Job Order A-2

            2. allocation of factory overhead to Job Order A-3

Answer 1

Solution Tournal entry to record factory overhead costs will be as follows: Date Account titles and explanation Debit Gredit Mar 31 21500 Manufacturing overhead [ 6000+2500 +10000 +2000 +1000] Accounts payable 21500 compute predetermined overhead rate by deviding estimated Overhead to be incurred by the estimated derect Labor- howers to be worked.

predetermined overhead riate = 24000/10000 dorect labor howers = 2.10 per direct tabor hour compute the amounts of overhead applied to Job A-2 and Tob-A-3 as follows: overhead appleed to Job A-2 = Actual direct Labor - hours worked x predetermined overhead rate = F100 X 2.10 = 14910 overhead appleed to Job A-3 = Actual direct labor hours worked x predetermined overhead rate = 3000 x 2.10 - 6300 Journal entry to record allocation of factory overhead to Tob- A-2 and Job Ax3 will be prepared as follows: The Date Account titles and Explanation Debit Gredit Mar 31 work in process Job A-2 14910 work 6300 in process Job A-3 Maruyacturing overhead 21210 Actual factory overhead is 21500 and appleed factory overhead is 21210. This means jactory overhead has been under- appled by 390 [ 21500 - 21210].

factory The adjusting entry to despose the under-appleed overhead will be prepared as follows: Date Account titles and explanation Debit Gredit 290 Maral cost of goods sold Manufacturing overhead 290