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 $685,980 $672,000
Estimated direct labor hours for year 10,500
Estimated machine hours for year 18,540
Actual factory overhead costs for March $54,990 $58,370
Actual direct labor hours for March 950
Actual machine hours for March 1,450

a. Determine the factory overhead rate for Factory 1.
$ per machine hour

b. Determine the factory overhead rate for Factory 2.
$ per direct labor hour

c. Journalize the entries to apply factory overhead to production in each factory for March.

Factory 1
Factory 2

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.

Factory 1 $
Factory 2 $

Homework Answers

Answer #1

Overhead rate =estimated overhead /Estimated machine hour/labor hour

a. Factory 1 =$685,980/18,540 machien hour

=$37 per machine hour

b .Factory 2=$672,000/10,500

=$64 per direct labor hours

c. Journalize the entries to apply factory overhead to production in each factory for March.

Accounts Debit Credit
1 Work in process inventory ($37*1450) $53,650
Factory overhead $53,650
2 Work in process ($64*950) $60,800
Factory overhead $60,800

d. if the applied overhead< actual overhead than overhead are underapplied

if the applied overhead > actual overhead than overhead are overapplied

Factory 1 =($53,650-$54,990) =$1,340 underapplied

Factory 2 =($60,800-$58,370) =$2,430 over applied

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