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 Estimated factory overhead cost for fiscal year beginning March 1 $916,180 $907,500 Estimated direct labor hours for year 12,100 24,110 $73,230 $78,480 Estimated machine hours for year Actual factory overhead costs for March Actual direct labor hours for March Actual machine hours for March 1,090 1,880 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

Answer 1

1) Factory overhead rate for factory 1 = 916180/24110 = 38 per machine hour

2) Factory overhead rate for factory 2 = 907500/12100 = 75 per DLH

3) Journal entry

No	General journal	Debit	Credit
1	Work in process-Factory 1 (1880*38)	71440
	Factory overhead		71440
2	Work in process-Factory 2 (1090*75)	81750
	Factory overhead		81750

4) Factory overhead 1 = (71440-73230) = 1790 Under applied

Factory overhead 2 = (81750-78480) = 3270 Over applied