Question

Factory Overhead Rates, Entries, and Account Balance 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 $708,050 $1,155,000 Estimated direct labor hours for year 15,400 Estimated machine hours for year 20,230 Actual factory overhead costs for March $56,680 $100,080 Actual direct labor hours for March 1,390 Actual machine hours for March 1,580 a. Determine the factory overhead rate for Factory 1. $ per machine hour b. Determine the factory overhead rate for Factory 2. $ per direct labor hour c. Journalize the entries to apply factory overhead to production in each factory for March. Factory 1 Factory 2 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. Factory 1 $ Factory 2 $

Answer 1

The answer to this question can be defined as follows:

Step-by-step explanation:

In point a:

`\text{Factory Overhead Rate 1} = \frac{\text{Expected administrative overhead to factory}}{\text{Estimated period time to machine}}`

`=(12900000)/( 600000 )\\\\ = \$ \ 21.50`

In point b:

`\text{Factory overtime rate 1} = \frac{\text{overhead costs estimated expense}}{\text{Specific hours of work estimated for the year}}`

`= (10,200,000 )/(250000) \\\\ = \$ \ 40.80`

In point c:

Daily paper

Number Name of account Debit Credit

1. Working
`(610000 * $21.50)`
`\$ \ 13115000`

Plant Overhead
`\$ \ 13115000`

2. Job under way
`(245000* $40.80)`
`\$ \ 9996000`

Overhead plant
`\$ \ 9996000`

In point d:

`\text{Factory 1} = 12,990,000 - 13,115,000`

`= 125000 \ Overapplied\ credit`

`\text{Factory 1} = 10,090,000 - 9,996,000`

`= $94000 \ Underapplied \ Debit`