Question

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 $1,442,000 $912,600 Estimated direct labor hours for year 25,350 Estimated machine hours for year 51,500 Actual factory overhead costs for March $115,110 $103,210 Actual direct labor hours for March 2,820 Actual machine hours for March 4,160 Required: a. Determine the factory overhead rate for Factory 1. b. Determine the factory overhead rate for Factory 2. c. Journalize the Mar. 31 entries to apply factory overhead to production in each factory. Refer to the chart of accounts for the exact wording of the account titles. 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.

Answer 1

See below

Step-by-step explanation:

Application overheads = Predetermined overheads × actual activity

Where

Predetermined overheads rate = Estimated overheads / estimated activity

Factory 1

Overheads are applied on the basis of machine hours

Predetermined overhead rate = $1,442,000/51,500 = $28

Therefore, application overhead = 4,160 × $28 = $116,480

Factory 2

Overheads are applied on the basis of direct labor hours

Predetermined overhead rate = $912,600/25,350 = $36

Application overhead = 2,820 × $36 = $101,520