Question

Applying Factory Overhead Bergan Company estimates that total factory overhead costs will be $620,000 for the year. Direct labor hours are estimated to be 80,000 a. For Bergan Company, determine the predetermined factory overhead rate using direct labor hours as the activity base. If required, round your answer to two decimal places. per direct labor hour b. During May, Bergan Company accumulated 2,500 hours of direct labor costs on Job 200 and 3,000 hours on Job 305, Determine the amount of factory overhead applied to Jobs 200 and 305 in May. cPrepare the journal entry to apply factory overhead to both jobs in May according to the predetermined overhead rate. If an amount box does not require an entry, leave it blank

Answer 1

Answer

a PREDETERMINED OVERHEAD RATE

predetermined overhead rate = estimated total overhead / estimated allocation base

Estimated total overhead = $620,000

Estimated allocation base (direct labour hours) = 80,000 hours

Predetermined overhead rate = 620,000 / 20,000 = $7.75

$7.75 is the predetermined overhead rate.

b OVERHEAD APPLIED

job 200 consume 2,500 labour hours and Job 305 consume 3,000 labour hours.

Overhead applied to Job 200

= 2,500 × 7.75 = $19,375

Overhead applied to Job 305

= 3,000 × 7.75 = $23,250

c JOURNAL ENTRIES

Job 200

Overhead applied a/c Dr 19,375

To Job 200 19,375

Job 305

Overhead applied a/c Dr 23,250

To Job 305 23,250

The above are the detailed calculations of predetermined overhead rate, overhead applied and related journal entries.

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