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.

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

X

Final Question

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		debit	overapplied
Factory 2		credit	overapplied

Answer 1

a	Factory overhead rate for Factory 1:	27	Per machine hour	(1478250/54750)
b	Factory overhead rate for Factory 2:	37	per direct labor hours	(1023050/27650)
c
Date	Account title and explanation	Debit	Credit
Mar, 31	Work in process	112590		(4170*27)
	Factory Overhead 1		112590
	(Factory overhead applied)
Mar, 31	Work in process	101750		(37*2750)
	Factory Overhead		101750
	(Factory overhead applied)
d	Factory 1	1550	Credit	Overapplied	(112590-111040)
	Factory 2	1870	Debit	Underapplied	(103620-101750)