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1.       A manufacturing company applies factory overhead based on machine hours. At the beginning of the...

1.       A manufacturing company applies factory overhead based on machine hours. At the beginning of the year, it estimated that factory overhead costs would be $65,975 and machine hours would be 4,550 hours. Actual factory overhead costs incurred were $69,875 and actual machine hours were 4,890.

a. Calculate the predetermined overhead rate.

b. Provide the journal entry to record the applied factory overhead.

c. Provide the journal entry to close out the factory overhead account.

Business   Accounting   
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Answer #1

1.Calculation of predetermined overhead rate

Pre-determined overhead rate = Estimated Total Factory Overhead Cost/Estimated Machine hours

= $ 65975/4550 hours

= $ 14.5/hours

2. Journal entry to record the applied factory overhead.

Applied Factory Overhead Cost = Pre-determined overhead rate * Actual Machine Hours

= 14.5 * 4890 hours

= $ 70,905

The journal entry to apply the factory overhead costs for the year wouldinclude a credit to Factory Overhead for $70905

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