Question

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	$

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