Question

Sundance Solar Company operates two factories. The company applies factory overhead to jobs on the basis...

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 $1,442,000 $912,600
Estimated direct labor hours for year 25,350
Estimated machine hours for year 51,500
Actual factory overhead costs for March $115,110 $103,210
Actual direct labor hours for March 2,820
Actual machine hours for March 4,160

Required:

a. Determine the factory overhead rate for Factory 1.
b. Determine the factory overhead rate for Factory 2.
c. Journalize the Mar. 31 entries to apply factory overhead to production in each factory. Refer to the chart of accounts for the exact wording of the account titles.
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.

Homework Answers

Answer #1

a) Factory overhead rate for factory 1 = 1442000/51500 = 28 per MH

b) Factory overhead rate for factory 2 = 912600/25350 = 36 per DLH

c) Journal entry

No General Journal Debit Credit
a Work in process-Factory 1 (4160*28) 116480
Factory overhead 116480
b Work in process-Factory 2 (2820*36) 101520
Factory overhead 101520

d) Calculate following

Applied overhead actual overhead Balance
Factory 1 116480 115110 1370 Over applied
Factory 2 101520 103210 1690 under applied
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