Question

Eclipse 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 August 1 $18,500,000 $44,000,000 Estimated direct labor hours for year 800,000 Estimated machine hours for year 1,250,000 Actual factory overhead costs for August $1,515,800 $3,606,300 Actual direct labor hours for August 64,500 Actual machine hours for August 105,000 Required: a. Determine the factory overhead rate for Factory 1. Round your answer to two decimal places. b. Determine the factory overhead rate for Factory 2. c. Journalize the Aug. 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. 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. d. Determine the balances of the factory overhead accounts for each factory as of August 31, and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead. Enter all amounts as positive numbers.

Answer 1

Eclipse Solar Company

a. Factory overhead rate for Factory 1 is $23.13

b. Factory overhead rate for Factory 2 is $35.20

c. Journal Entries:

August 31:

Debit Work in Process Factory 1 $1,491,885

Credit Factory Overhead $1,491,885

Debit Work in Process Factory 2 $3,696,000

Credit Factory Overhead $3,696,000

d. Balances of the factory overhead accounts:

Factory 1 $23,915 underapplied

Factory 2 $89,700 overapplied

Step-by-step explanation:

a) Data and Calculations:

Factory 1 Factory 2

Overhead application basis machine hrs direct labor hrs

Estimated overhead costs $18,500,000 $44,000,000

Direct labor hours 800,000

Factory overhead rate $23.125

Machine hours 1,250,000

Factory overhead rate $35.20

August:

Actual overhead costs $1,515,800 $3,606,300

Actual direct labor

hours for August 64,500

Actual machine hours for August 105,000

Application of overhead to production for August:

Factory 1 = $1,491,885 (64,500 * $23.13)

Factory 2 $3,696,000 (105,000 * $35.20)

Factory overhead accounts:

Factory 1 Factory 2

Actual overhead costs $1,515,800 $3,606,300

Applied overhead costs $1,491,885 $3,696,000

Under/(Over)-Applied $23,915 $89,700 Overapplied