Question

Calculator

Print Item

Applying Factory Overhead

Jernigan Company estimates that total factory overhead costs will be $204,000 for the year. Direct labor hours are estimated to be 12,000.

a. For Jernigan Company, determine the predetermined factory overhead rate using direct labor hours as the activity base.
$ per direct labor hour

b. During May, Jernigan Company accumulated 580 hours of direct labor costs on Job 200 and 700 hours on Job 305. Determine the amount of factory overhead applied to Jobs 200 and 305 in May.
$

c. Prepare the journal entry to apply factory overhead to both jobs in May according to the predetermined overhead rate.

Answer 1

Solution a:

Predetermined overhead rate = Estimated overhead / Estimated direct labor hours

= $204,000 / 12000 = $17 per DLH

Solution b:
Factory overhead applied to job 200 = 580*$17 = $9,860

Factory overhead applied to Job 305 = 700*$17 = $11,900

Total overhead applied to jobs = $9,860 + $11,900 = $21,760

Solution c:

Journal Entries - Jerinigan Company
Event	Particulars	Debit	Credit
1	Work In Process Dr	$21,760.00
	To Factory overhead		$21,760.00
	(To record factory overhead applied)