Question

Factory Overhead Rates, Entries, and Account Balance

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	$665,260		$1,020,000
Estimated direct labor hours for year				15,000
Estimated machine hours for year		22,940
Actual factory overhead costs for March		$53,210		$88,130
Actual direct labor hours for March				1,350
Actual machine hours for March		1,790

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

Feedback

a-b. Factory 1 overhead is applied based on machine hours. Factory 2 overhead is applied based on direct labor hours.

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

Factory 1	Work in Process		--------
	Factory Overhead	---------
Factory 2	Work in Process		--------
	Factory Overhead	--------

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	$	Credit	Overapplied
Factory 2	$	Debit	Underapplied

Answer 1

		Factory 1	Factory 2
Estimated OH		$ 665,260.00	$ 1,020,000.00
Estimated MHs		22940
Estimated DLHs			15000
Factory OH rate		$           29.00	$              68.00
		(a)	(b)

c)			Particulars		Debit	Credit
	Factory 1		Work in Process		$ 51,910.00
			To Factory OH			$ 51,910.00
			($ 29 x 1790)
	Factory 2		Work in Process		$ 91,800.00
			To Factory OH			$ 91,800.00
			($ 68 x 1350)

d)	Particulars			Factory 1	Factory 2
	Actual OH			$ 53,210.00	$ 88,130.00
	Applied OH			$ 51,910.00	$ 91,800.00
	Overapplied/ (Underapplied)			$ (1,300.00)	$   3,670.00
				(Debit)	(Credit)