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 $12,900,000 $10,200,000 Estimated direct labor hours for year 250,000 Estimated machine hours for year 600,000 Actual factory overhead costs for March $1,082,500 $840,833 Actual direct labor hours for March 20,416 Actual machine hours for March 50,833 a. Determine the factory overhead rate for Factory 1. Round the answer to two decimal places. $ 21.50 per machine hour b. Determine the factory overhead rate for Factory 2. Round the answer to two decimal places. 40.80 per direct labor hour

Answer 1

c.

Factory 1

Predetermined overhead rate = $21.50 per machine hour

Actual machine hours = 50,833

Factory overhead applied = Actual machine hours x Predetermined overhead rate

= 50,833 x 21.50

= $1,092,910

Factory 1	Work in process	1,092,910
	Factory overhead		1,092,910

Factory 2

Predetermined overhead rate = $40.80 per direct labor hour

Actual direct labor hour = 20,416

Factory overhead applied = Actual direct labor hours x Predetermined overhead rate

= 20,416 x 40.80

= $832,973

Factory 2	Work in process	832,973
	Factory overhead		832,973

d.

Factory 1

Actual factory overhead = $1,082,500

Applied factory overhead = $1,092,910

Overapplied factory overhead = Applied factory overhead- Actual factory overhead

= 1,092,910-1,082,500

= $10,410

Factory 2

Actual factory overhead = $840,833

Applied factory overhead = $832,973

Underapplied factory overhead =Actual factory overhead-  Applied factory overhead

= 840,833-832,973

= $8,860

Factory 1	$10,410	Credit	Overapplied
Factory 2	$8,860	Debit	Underapplied

Kindly comment if you need further assistance.

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