Question

Applying Factory Overhead Jernigan Company estimates that total factory overhead costs will be $76,000 for the...

Applying Factory Overhead

Jernigan Company estimates that total factory overhead costs will be $76,000 for the year. Direct labor hours are estimated to be 19,000.

a. For Jernigan Company, determine the predetermined factory overhead rate using direct labor hours as the activity base.
$ per direct labor hour

b. During May, Jernigan Company accumulated 580 hours of direct labor costs on Job 200 and 630 hours on Job 305. Determine the amount of factory overhead applied to Jobs 200 and 305 in May.
$

c. Prepare the journal entry to apply factory overhead to both jobs in May according to the predetermined overhead rate.
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Answer #1

a.

Predetermined factory overhead rate $4 per direct labor hour

Explanation:

Predetermined factory overhead rate = Estimated overhead cost / Estimated direct labor hours
Predetermined factory overhead rate = $76,000/19,000
Predetermined factory overhead rate = $4 per direct labor hour

b.

Jobs 200 $2,320
Jobs 305 $2,520

Explanation:

Jobs 200 $2,320 (580 hours * $4)
Jobs 305 $2,520 (630 hours *$4)

c.

Date Account Titles and Explanation Debit Credit
May 31 Work in process ($2,320 + $2,520) $4,840
Factory Overhead $4,840
(To record apply factory overhead)
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