Question

Winston Company estimates that the factory overhead for the following year will be $1,361,500. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 38,900 hours. The total machine hours for the year were 54,800. The actual factory overhead for the year was $1,906,000.

a. Determine the total factory overhead amount applied. Round to the nearest dollar.
$

b. Compute the over- or underapplied amount for the year. Enter the amount as a positive number.
$  

c. Journalize the entry to transfer the over- or underapplied factory overhead to cost of goods sold. If an amount box does not require an entry, leave it blank.

Answer 1

Solution a:

Predetermined overhead rate = Estimated overhead / Estimated machine hours = $1,361,500 / 38900 = $35 per machine hour

Total factory overhead applied = Actual machine hours * OH rate = 54800 * $35 = $1,918,000

Solution b:

Over applied overhead = Overhead applied - Actual overhead = $1,918,000 - $1,906,000 = $12,000

Solution c:

Journal Entries
Event	Particulars	Debit	Credit
1	Factory overhead Dr	$12,000.00
	To Cost of goods sold		$12,000.00
	(To close overapplied overhead to COGS)