Question

The chief cost accountant for Kenner Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year beginning May 1 would be $210,000 and total direct labor costs would be $150,000. During May, the actual direct labor cost totaled $12,000 and factory overhead cost incurred totaled $17,100.

Required:

A.	What is the predetermined factory overhead rate based on direct labor cost?
B.	On May 31, journalize the entry to apply factory overhead to production. Refer to the Chart of Accounts for exact wording of account titles.
C.	What is the May 31 balance of the account Factory Overhead-Blending Department?
D.	Does the balance in part C represent over- or underapplied factory overhead?

Answer 1

Answer
a)	Predetermined factory overhead
	Factory overhead Cost / labor Cost
	$210000/150000
	140%
b)	Application of factory overhead
	Labor cost	$      12,000
	Factory overhead	$      16,800
	($12000*140%)
				Debit	Credit
	Working in progress - Blending Department			$16,800
	Factory overhead blending department				$16,800
c)	Balance in factory overhead blending department
	Overhead Incurred	$      17,100
	Less:
	Overhead Applied	$      16,800
	Balance	$           300
	It is under applied of overhead hence Debit Balance
d)	Underapplied.