Question

Factory Overhead Rate, Entry for Applying Factory Overhead, and Factory Overhead Account Balance

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 $571,200, and total direct labor costs would be $476,000. During May, the actual direct labor cost totaled $41,000, and factory overhead cost incurred totaled $51,150.

a. What is the predetermined factory overhead rate based on direct labor cost? Enter your answer as a whole percent not in decimals.

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b. Journalize the entry to apply factory overhead to production for May.

	Accounts Payable Cash Factory Overhead-Blending Department Wages Payable Work in Process-Blending Department
	Accounts Payable Cash Factory Overhead-Blending Department Finished Goods Work in Process-Blending Department

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c. What is the May 31 balance of the account Factory Overhead—Blending Department?

Amount:	$
Debit or Credit?	Credit Debit

d. Does the balance in part (c) represent overapplied or underapplied factory overhead?

• Overapplied factory overhead
• Underapplied factory overhead

Answer 1

Solution a:

Predetermined factory Overhead Rate = Estimated Factory Overhead cost / Direct labor cost = $571,200/$476,000 = 120%

Solution b:

Factory Overhead Applied = Actual Direct labor Cost *120% = $41000*120% = $49,200

Journal Entry
S. no.	Particulars	Debit	Credit
1	Work in Process- Blending Department	$49,200
	To Factory Overhead- Blending department		$49,200
	(To record factory overhead applied to production)

Solution c:

Actual Factory Overhead (Debit) = $51,150

Applied factory Overhead (Credit) = $49,200

Balance in factory Overhead account = $51,150 - $49,200 = $1,950 (Debit Balance)

Solution d:

Balance in part (c) represent Underapplied Factory overhead.