Question

1. Factory Overhead Rates, Entries, and Account Balance

   Eclipse 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 August 1	$18,500,000		$44,000,000
   Estimated direct labor hours for year				800,000
   Estimated machine hours for year		1,250,000
   Actual factory overhead costs for August		$1,515,800		$3,606,300
   Actual direct labor hours for August				64,500
   Actual machine hours for August		105,000

   a. Determine the factory overhead rate for Factory 1. Round your answer to two decimal places.
   $ 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 August. If an amount box does not require an entry, leave it blank.

   Factory 1
   Factory 2

   d. Determine the balances of the factory overhead accounts for each factory as of August 31, and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead.

   Factory 1	$
   Factory 2	$

Answer 1

1. a. Determine the factory overhead rate for Factory 1. Round your answer to two decimal places.
   $18500000/1250000 = 14.80 per machine hour

   b. Determine the factory overhead rate for Factory 2.
   $44000000/800000 = 55 per direct labor hour

   c. Journalize the entries to apply factory overhead to production in each factory for August. If an amount box does not require an entry, leave it blank.

   Factory 1	Work in process-Factory 1 (105000*14.8)	1554000
   	Manufacturing overhead		1554000
   Factory 2	Work in process-Factory 2 (64500*55)	3547500
   	Manufacturing overhead		3547500

   d. Determine the balances of the factory overhead accounts for each factory as of August 31, and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead.

   Factory 1	$1554000-1515800 = 38200	Over applied
   Factory 2	$3547500-3606300 = 58800	Under applied