Question

Winston Company estimates that the factory overhead for the following year will be $831,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 27,700 hours. The total machine hours for the year were 55,000 hours. The actual factory overhead for the year was $1,673,000. Enter the amount as a positive number.

a. Determine the total factory overhead amount applied. Round to the nearest dollar.
$

b. Compute the over- or underapplied amount for the year.
$  

c.   Journalize the entry to transfer the over- or underapplied factory overhead to cost of goods sold. If an amount box does not require an entry, leave it blank.

  

Answer 1

a.

Estimated factory overhead = $831,000

Estimated machine hours = 27,700

Predetermined overhead rate = Estimated factory overhead/ Estimated machine hours

= 831,000/27,700

= $30 per machine hour

Actual machine hours = 55,000

Factory overhead applied = Actual machine hours x Predetermined overhead rate

= 55,000 x 30

= $1,650,000

b.

Actual factory overhead = $1,673,000

Under applied factory overhead = Actual factory overhead- Factory overhead applied

= 1,673,000-1,650,000

= $23,000

c.

General Journal	Debit	Credit
Cost of goods sold	$23,000
Factory overhead		$23,000
( To close Under applied factory overhead cost)

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