Question

Tiny Biggs 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 September 1	$1,442,000	$912,600
Estimated direct labor hours for year		25,350
Estimated machine hours for year	51,500
Actual factory overhead costs for September	$115,110	$103,210
Actual direct labor hours for September		2,820
Actual machine hours for September	4,160

Required:

A.	Determine the factory overhead rate for Factory 1.
B.	Determine the factory overhead rate for Factory 2.
C.	Journalize the Sep. 30 entries to apply factory overhead to production in each factory for September. Refer to the Chart of Accounts for exact wording of account titles.
D.	Determine the balances of the factory overhead accounts for each factory as of September 30, and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead.

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 Sep. 30 entry to apply factory overhead to production in Factory 1 for September. Refer to the Chart of Accounts for exact wording of account titles. Scroll down to record the entry for Factory 2.

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2

Now journalize the second Sep. 30 entry to apply factory overhead to production in Factory 2 for September. Refer to the Chart of Accounts for exact wording of account titles.

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2

D. Determine the balances of the factory overhead accounts for each factory as of September 30, and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead.

Factory 1
Factory 2

Answer 1

a) Factory overhead rate = estimated factory overhead cost/estimated machine hrs
factory overhead rate = 1442000/51500 = 28
Factory overhead rate factory 1 = 28
b) Factory overhead rate = estimated factory overhead cost/estimated direct labor hours
factory overhead rate = 912600/25350 = 36
Factory overhead rate factory 2 = 36
c) Journal entries Factory - 1
date	particulars		Debit	Credit
30-Sep	work in process (28*4160)		116480
	factory overhead			116480
	( to record factory overhead)
Factory = 2
30-Sep	work in process (2820*36)		101520
	factory overhead			101520
	(To record factory overhead)
d) Computation of balance factory overhead account
in factory 1 actual amount incurred is $115110 and estimated is $116480
Balance will be = 116480-115110 = 1370
here estimated factory overhead amount is more than actual factory overhead amount will be
overapplied factory overhead therefore it will be a credit balance of $1370
For factory 2
balance = 101520-103210 = -1690
in factory 2 estimated factory overhead is less than actual factory overhead
therefore it will be underapplied factory overhead and there will be debit balance of $ 1690