Question

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

$1,478,250

$1,023,050

Estimated direct labor hours for year

27,650

Estimated machine hours for year

54,750

Actual factory overhead costs for March

$111,040

$103,620

Actual direct labor hours for March

2,750

Actual machine hours for March

4,170

Required:

a. Determine the factory overhead rate for Factory 1.

b. Determine the factory overhead rate for Factory 2.

c. Journalize the Mar. 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.

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.

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 Mar. 31 entry to apply factory overhead to production in Factory 1. Refer to the Chart of Accounts for exact wording of account titles. Scroll down to record the entry for Factory 2.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2

Now journalize the second Mar. 31 entry to apply factory overhead to production in Factory 2. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
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

a
27	per machine hour	=1478250/54750
b
37	per direct labor hour	=1023050/27650
c
Date	Description	Debit	Credit
Mar 31	Work in Process	112590		=4170*27
	Factory overhead		112590
Date	Description	Debit	Credit
Mar 31	Work in Process	101750		=2750*37
	Factory overhead		101750
d
Factory 1	1550	Overapplied	Credit	=112590-111040
Factory 2	1870	Underapplied	Debit	=103620-101750