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	$632,970		$506,300
Estimated direct labor hours for year				8,300
Estimated machine hours for year		16,230
Actual factory overhead costs for March		$50,770		$43,920
Actual direct labor hours for March				750
Actual machine hours for March		1,270

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

a
Factory 1	$39 per machine hour	=632970/16230
b
Factory 2	$61 per direct labor hour	=506300/8300
c
Factory 1	Work in Process	49530		=1270*39
	Factory Overhead		49530
Factory 2	Work in Process	45750		=750*61
	Factory Overhead		45750
d
Factory 1	1240	Debit Underapplied	=50770-49530
Factory 2	1830	Credit Overapplied	=45750-43920