Question

Factory Overhead Rates, Entries, and Account Balance

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	$676,900		$676,500
Estimated direct labor hours for year				12,300
Estimated machine hours for year		19,340
Actual factory overhead costs for March		$54,170		$58,610
Actual direct labor hours for March				1,110
Actual machine hours for March		1,510

a. Determine the factory overhead rate for Factory 1.
$ per machine hour

b. Determine the factory overhead rate for Factory 2.
$ per direct labor hour

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a-b. Factory 1 overhead is applied based on machine hours. Factory 2 overhead is applied based on direct labor hours.

c. Journalize the entries to apply factory overhead to production in each factory for March.

Factory 1	Work in Process
	Factory Overhead
Factory 2	Work in Process
	Factory Overhead

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c. Increase the work in process and reduce the factory overhead.

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	Underapplied
Factory 2	$	Credit	Overapplied

Answer 1