Question

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 $160,000 and total direct labor costs would be $100,000. During May, the actual direct labor cost totaled $12,500 and factory overhead cost incurred totaled $20,350.

Required:

A.	What is the predetermined factory overhead rate based on direct labor cost?
B.	On May 31, journalize the entry to apply factory overhead to production. Refer to the Chart of Accounts for exact wording of account titles.
C.	What is the May 31 balance of the account Factory Overhead-Blending Department?
D.	Does the balance in part C represent over- or underapplied factory overhead?

A. What is the predetermined factory overhead rate based on direct labor cost?

B. On May 31, journalize the entry to apply factory overhead to production. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2

C. What is the May 31 balance of the account Factory Overhead-Blending Department?

Amount:
Debit or credit?

D. Does the balance in part C represent over- or underapplied factory overhead?

Please Answer all parts!

Answer 1

a.

predetermined factory overhead rate = estimated overhead / estimated direct labor costs

= 160000 / 100000 = 160%

b.

Transaction	Account title	Debit	Credit
1	Work in process inventory- Blending ($12500*160%)	$20,000
	To Factory Overhead		$20,000

c.

May 31 balance of the account Factory Overhead = Actual - Applied overhead

= $20350 - 20000 = $350 (Debit Balance)

d.

Balance in part C represent = underapplied factory overhead