Question

Cavy Company estimates that total factory overhead costs will be $660,000 for the year. Direct labor hours are estimated to be 100,000. Determine

(a) the predetermined factory overhead rate,
(b) the amount of factory overhead applied to Job 345 if the amount of direct labor hours is 560 and Job 777 if the amount of direct labor hours is 800, and
(c) prepare the journal entry to apply factory overhead in April according to the predetermined overhead rate.

Answer 1

a) The predetermined factory overhead rate= factory overhead costs/ Direct labor hours = $660,000 / 100,000= $6.6 per DLH

(b) The amount of factory overhead applied to Job 345 if the amount of direct labor hours is 560= 6.6 *560= $3696

The amount of factory overhead applied to Job 777 if the amount of direct labor hours is 800 = 6.6 *800= $5280

(c) The journal entry to apply factory overhead in April according to the predetermined overhead rate

The factory Overhead costs for the year are $ 660,000

The predetermined factory overhead rate = $ 6.6

Direct labor hours are estimated to be 100,000 for the year

Direct labor hours are estimated to be for the month = 100,000/12= 8333.33

The factory Overhead costs for the month are = 8333.33 * 6.6= $ 55,000

Factory Overhead $ 55000 Dr.

Work In Process $ 55,000 Cr.

The journal entry to apply factory overhead in April according to the predetermined overhead rate.

Answer 2

A...=$6.6; B=$3,696 and $5,280

Step-by-step explanation:

A. To calculate the predetermined factory overhead rate,

Given

overhead costs = $660,000

Direct labor hours = 100,000.

overhead rate = overhead cost/labor hours

= $660,000/100000

=$6.6

B. To calculate the amount of factory overhead applied to Job 345 if the amount of direct labor hours is 560 and Job 777 if the amount of direct labor hours is 800

Given

Job 345 direct labor hours is 560

Job 777 direct labor hours is 800

Therefore

Factory overhead for job 345 = direct labor hours × predetermined factory overhead rate

= 560hours × $6.6

=$3,696

Factory overhead for job 777 = direct labor hours × predetermined factory overhead rate

= 800hours × $6.6

=$5,280

C. Journal entry for April

Add the overheads the two current jobs

$3,696 + $5,280= $8,976

Now record $8,976 in debit column against current work

record $8,976 in credit column against factory overhead

Account debit credit

1. current work $8,976

2. factory overhead $8,976