Question

Factory Overhead Rate, Entry for Applying Factory Overhead, and Factory Overhead Account Balance The chief cost accountant for Mountain Glade Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year beginning April 1 would be $537,500, and total direct labor costs would be $430,000. During April, the actual direct labor cost totaled $37,000, and factory overhead cost incurred totaled $48,100. a. What is the predetermined factory overhead rate based on direct labor cost? Enter your answer as a whole percent not in decimals Feexliack b. Journalize the entry to apply factory overhead to production for April. Work in Process-Blending Department Factory Overhead-Blending Department Faexlivack c. What is the April 30 balance of the account Factory Overhead-Blending Department? Amount: Debit or Credit? d. Does the balance in part (c) represent overapplied or underapplied factory overhead? Debit Underapplied factory overhead

Answer 1

Mountain Glade Beverage Co.

1. Determination of predetermined factory overhead rate based on direct labor cost:

Estimated direct labor cost = $430,000

Estimated factory overhead = $537,500

Factory overhead expressed as a percentage of direct labor cost = ($537,500/$430,000) x 100 =125%

Hence, the predetermined factory overhead rate based on direct labor cost = 125%

1. Entry to apply factory overhead to production in April is as follows,

Account Titles and Explanation	Debit	Credit
Work-in-Process - Blending Department	$46,250
Factory Overhead - Blending Department		$46,250
(To apply factory overhead, $37,000 x 125% = $46,250 to production)

1. Determination of the April 30 balance of the account factory overhead – Blending Department:

Factory Overhead account balance = actual overhead incurred - estimated overhead

            = $48,100 - $46,250 = $1,850

The Factory Overhead account shows a Debit balance of $1,850 on April 30

1. The balance represents Underapplied Factory Overhead.