Question

The cost accountant for River Rock Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year beginning February 1 would be $210,000, and total direct labor costs would be $150,000. During February, the actual direct labor cost totaled $12,000, and factory overhead cost incurred totaled $17,100 Required: a. What is the predetermined factory overhead rate based on direct labor cost? b. Journalize the entry to apply factory overhead to production for February 28. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for spaces or journal explanations. Every line on a journal page is used for debit or credit entries. Do not add explanations or skip a line between journal entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. C. What is the February 28 balance of the account Factory Overhead-Blending Department? d. Does the balance in part (c) represent over- or underapplied factory overhead?

Answer 1

Solution a:

Predetermined overhead rate =Total Factory overhead cost / Total direct labour cost X 100

= $210000/ $150000 = 140%

Solution b:

Particulars	Debit	Credit	Assets	Liabilities	Equity
Work in process inventory ($12000*140%)	$16800		+$16800
factory overhead		$16800			-$16800

Solution c:

February 28 balance of the account Factory Overhead = Actual overhead - Applied overhead

= $17100 - $16800 = $300(Debit)

Solution d:

the balance in part (c) represent underapplied factory overhead Because Actual factory OH cost incurred is more than the applied cost