Question

Bergan Company estimates that total factory overhead costs will be $620,000 for the year. Direct labor hours are estimated to be 80,000. For Bergan Company, (a) determine the predetermined factory overhead rate using direct labor hours as the activity base, (b) determine the amount of factory overhead applied to Jobs 200 and 305 in May using the data on direct labor hours from BE 2-2, and (c) prepare the journal entry to apply factory overhead to both jobs in May according to the predetermined overhead rate.

Answer 1

Answer and Explanation:

The computation is shown below:

a. The predetermined overhead rate is

= $620,000 ÷ 80,000 direct labor hours

= $7.75

b. The amount of overhead applied is

For jobs 200, it is

= 2500 × $7.75

= $19,375

For job 305

= 3,000 × $7.75

= $23,250

c. The journal entry is

Work in Process Dr $42,625.00 ($19,375 + $23,250)

To Factory Overhead $42,625.00

(being the factory overhead is recorded)