Question

Cavy Company estimates that total factory overhead costs will be $733,460 for the year. Direct labor hours are estimated to be 91,000.

Required:

Determine (a) the predetermined factory overhead rate; (b) the amount of factory overhead applied to Job 567 if the amount of direct labor hours is 1,400 and Job 999 if the amount of direct labor hours is 2,900; and (c) prepare the journal entry to apply factory overhead for April according to the predetermined overhead rate. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

a)

Predetermined overhead rate = Estimated Factory overheads/Estimated Direct labor hours

= $733,460/91,000

= $8.06 per direct labor hour

b)

Overhead applied to job 567 = Actual direct labor hours used x  Predetermined overhead rate

= 1,400 x 8.06

= $11,284

Overhead applied to job 999 = Actual direct labor hours used x  Predetermined overhead rate

= 2,900 x 8.06

= $23,374

Total factory overhead applied = Overhead applied to job 567 + Overhead applied to job 999

= $11,284 + $23,374

= $34,658

c)

Journal

	Work in process - Job 567	11,284
	Work in process - Job 999	23,374
	Factory overhead		$34,658