Question

The chief cost accountant for Kenner Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year beginning May 1 would be $140,000 and total direct labor costs would be $100,000. During May, the actual direct labor cost totaled $13,500 and factory overhead cost incurred totaled $19,200.

Required:

A.	What is the predetermined factory overhead rate based on direct labor cost?
B.	On May 31, journalize the entry to apply factory overhead to production. Refer to the Chart of Accounts for exact wording of account titles.
C.	What is the May 31 balance of the account Factory Overhead-Blending Department?
D.	Does the balance in part C represent over- or underapplied factory overhead?

Answer 1

A)	Predetermined overhead rate
	Estimated factory overhead/estimated direct labor cost
	140,000/100,000
	140%
B)	Journal Entry
	Date	Account titles & Explanations				Debit	Credit
	31-May	Work in process inventory				18900
		Factory overhead					18,900
		(13,500*140%)
C)		Factory overhead
	Actual overhead		19,200	Applied overhead		18,900
	Balance		300
	May 31 balance is 300
D)	The May 31 balance represent under applied overhead