Question

Alinger Company estimates that total factory overhead costs will be $132,000 for the year. Direct labor hours are estimated to be 22,000.

A. For Salinger Company, determine the pre-determined factory overhead rate using direct labor hours as the activity base.
B. During May, Salinger Company accumulated 530 hours of direct labor costs on Job 200 and 770 hours on Job 305. Determine the amount of factory overhead applied to Jobs 200 and 305 in May. C. Prepare the journal entry to apply factory overhead to both jobs in May according to the pre-determined overhead rate.
CHART OF ACCOUNTSAlmerinda CompanyGeneral Ledger
ASSETS110 Cash121 Accounts Receivable125 Notes Receivable126 Interest Receivable131 Materials132 Work in Process133 Factory Overhead134 Finished Goods141 Supplies142 Prepaid Insurance143 Prepaid Expenses181 Land191 Factory192 Accumulated Depreciation-FactoryLIABILITIES210 Accounts Payable221 Utilities Payable231 Notes Payable236 Interest Payable241 Lease Payable251 Wages Payable252 Consultant Fees PayableEQUITY311 Common Stock340 Retained Earnings351 Dividends390 Income Summary REVENUE410 Sales610 Interest RevenueEXPENSES510 Cost of Goods Sold520 Wages Expense531 Selling Expenses532 Insurance Expense533 Utilities Expense534 Office Supplies Expense540 Administrative Expenses560 Depreciation Expense-Factory590 Miscellaneous Expense710 Interest EA. For Almerinda Company, determine the predetermined factory overhead rate using direct labor hours as the activity base.
B. During April, Almerinda Company accumulated 20,000 hours of direct labor costs on Job 50 and 24,000 hours on Job 51. Determine the amount of factory overhead applied to Jobs 50 and 51 in April.
C. Prepare the journal entry on Apr.30 to apply factory overhead to both jobs in April according to the pre-determined overhead rate.

Answer 1

A. Salinger Company

1. Predetermined factory overhead rate, using direct labor hours:

= $6

2. Factory overhead applied to Jobs 200 and 305:

Job 200 Job 305

Overhead rate $6 $6

Direct labor hours 530 770

Overhead applied $3,180 $4,620

3. Journal Entries:

Date Description Debit Credit

May 31 Job 200 $3,180

Job 305 $4,620

Factory Overhead 134 $7,800

To record the overhead applied to Jobs 200 and 305 respectively.

B. Almerinda Company

Question Completion:

Almerinda Company estimates that total factory overhead costs will be $1,750,000 for the year. Direct labor hours are estimated to be 500,000.

1. Predetermined factory overhead rate, using direct labor hours:

= $3.50

2. Determination of factory overhead applied to Job 50 and Job 51 in April:

Factory overhead applied to Jobs 200 and 305:

Job 50 Job 51

Overhead rate $3.50 $3.50

Direct labor hours 20,000 24,000

Overhead applied $70,000 $84,000

3. Journal Entries:

Date Description Debit Credit

April 30 Job 50 $70,000

Job 51 84,000

Factory Overhead $154,000

To record the overhead applied to Jobs 50 and 51 respectively.

Step-by-step explanation:

a) Salinger Company

Data and Calculations:

Total factory overhead = $132,000

Direct labor hours (estimate) = 22,000

Predetermined factory overhead rate = Factory overhead divided by direct labor hours

= $132,000/22,000

= $6

b) Almerinda Company

Data and Calculations:

Total factory overhead = $1,750,000

Direct labor hours (estimate) = 500,000

Predetermined factory overhead rate = Factory overhead divided by direct labor hours

= $1,750,000/500,000

= $3.50