Question

Tiny Biggs 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 September 1 $1,450,400 $800,250 Estimated direct labor hours for year 24,250 Estimated machine hours for year 51,800 Actual factory overhead costs for September $116,120 $98,220 Actual direct labor hours for September 2,920 Actual machine hours for September 4,200 Required: A. Determine the factory overhead rate for Factory 1. B. Determine the factory overhead rate for Factory 2. C. Journalize the Sep. 30 entries to apply factory overhead to production in each factory for September. Refer to the Chart of Accounts for exact wording of account titles. D. Determine the balances of the factory overhead accounts for each factory as of September 30, and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead.

Answer 1

a) Factory overhead rate for factory 1 = 1450400/51800 = 28 per machine hour

b) Factory overhead rate for factory 2 = 800250/24250 = 33 per labour hour

c) Journal entry :

Date	account & explanation	debit	credit
Sep 30	Work in process-Factory 1 (4200*28)	117600
	Work in process-Factory 2 (2920*33)	96360
	Manufacturing overhead		213960
	(To record applied overhead)

d) Determine balance of the factory overhead accounts :

Factory 1 = 117600-116120 = 1480 Overapplied

Factory 2 = 96360-98220 = 1860 Underapplied