Question

Applying Factory Overhead

Keenan Company estimates that total factory overhead costs will be $144,000 for the year. Direct labor hours are estimated to be 9,000.

a. For Keenan Company, determine the predetermined factory overhead rate using direct labor hours as the activity base. If required, round your answer to two decimal places.
$ per direct labor hour

b. During August, Keenan Company accumulated 850 hours of direct labor costs on Job 40 and 890 hours on Job 42. Determine the amount of factory overhead applied to Jobs 40 and 42 in August.
$

c. Prepare the journal entry to apply factory overhead to both jobs in August according to the predetermined overhead rate.

Answer 1

Answer
a)	Overhead rate = Estimated overhead/Estimated labor hour
	= $1,44,000 / $9,000
	= $16 per labor hour
b)	Applied overhead = Actual labor hour*Applied rate
	= (850+890)*16
	= $15,090
c)	Journal entry
Date	Account Titles and Explanations	Debit	Credit
	Work in process-Job 40	$   13,600
	Work in process-Job 42	$   14,240
	To, Manufacturing overhead		$   27,840
	(To record applied overhead)

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