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 $972,660 $1,015,200 Estimated direct labor hours for year 14,100 Estimated machine hours for year 22,620 Actual factory overhead costs for March $77,570 $87,780 Actual direct labor hours for March 1,270 Actual machine hours for March 1,760 a. Determine the factory overhead rate for Factory 1. $fill in the blank dc186a016ffefd2_1 per machine hour b. Determine the factory overhead rate for Factory 2. $fill in the blank dc186a016ffefd2_2 per direct labor hour c. Journalize the entries to apply factory overhead to production in each factory for March. Factory 1 fill in the blank 904b41fddff3057_2 fill in the blank 904b41fddff3057_4 Factory 2 fill in the blank 904b41fddff3057_6 fill in the blank 904b41fddff3057_8 d. Determine the balances of the factory overhead accounts for each factory as of March 31, and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead. Factory 1 $fill in the blank 62d347fab007058_1 Factory 2 $fill in the blank 62d347fab007058_4

Answer 1

See below

Step-by-step explanation:

Application overheads = Predetermined overheads × Actual activity

Where

Predetermined overhead rate = Estimated overheads ÷ Estimated activity

Factory 1

Overheads are applied on the basis of machine hours

Predetermined overhead rate = $972,660 ÷ 22,620 = $43

Therefore, application overhead

= 1,760 × $43

= $75,680

Factory 2

Overheads are applied on the basis of direct labor hours

Predetermined overhead rate = $1,015,200 ÷ 14,100 = $72

Therefore, application of overheads = 1,270 × $72 = $91,440

Overhead account - Factory 1

Dr :

Bank

$77,570

Total

$77,570

Credit :

Work in process

$75,680

Under applied ( balance)

$1,890

Total

$77,570

Overhead account Factory 2

Debit :

Bank

$87,780

Over - applied (balance)

$3,660

Total

$91,440