Question

On March 31, 2017, Alpha Corporation recorded the following factory overhead costs incurred: Factory Manager Salary $6,000 Factory Utilities 2,500 Machinery Deprecation 10,000 Machinery Repairs 2,000 Factory Insurance (prepaid) 1,000 The overhead application rate is based on direct labor hours. The preset formula for overhead application estimated that $21,000 would be incurred, and 10,000 direct labor hours would be worked. During March, 7,100 hours were actually worked on Job Order A-2 and 3,000 hours were actually worked on Job Order A-3. Use this information to prepare the March 31 General Journal entry for the adjusting entry to dispose of any over or under application of factory overhead. (round any final dollar answers to the nearest whole dollar):

Answer 1

SOLUTION

Predetermine Overhead Rate = $21,000 / 10,000 hrs = $2.1 per hour

S.No.	Accounts title and Explanation	Debit ($)	Credit ($)
1.	Factory Overhead	21,500
	Salaries Payable		6,000
	Utilities Payable		2,500
	Accumulated Depreciation - Mach.		10,000
	Repairs Expense		2,000
	Prepaid Insurance		1,000
	( To record the factory overhead costs)
2.	Work in Process - Job A-2	14,910
	Factory Overhead (7,100 hrs * $2.10)		14,910
	(To record the allocaton of factory overhead to Job Order A-2)
3.	Work in Process - Job A-3	6,300
	Factory Overhead (3,000 hrs * $2.10)		6,300
	(To record the allocaton of factory overhead to Job Order A-3)
4.	Cost of goods sold ($21,500 - $14,910 - $6,300)	290
	Factory Overhead		290
	(To record the adjustng entry to dispose of any over or under applicaton of factory overhead)