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	$524,700		$1,154,400
Estimated direct labor hours for year				14,800
Estimated machine hours for year		23,850
Actual factory overhead costs for March		$41,940		$99,590
Actual direct labor hours for March				1,330
Actual machine hours for March		1,860

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 entries to apply factory overhead to production in each factory for March.

Factory 1
Factory 2

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	$
Factory 2	$

Answer 1

	Machine Hour(Base)	Labour Hour(Base)
	Factory 1	Factory 2
Estimated factory overhead cost for fiscal year beginning March 1	524700	1154400
Estimated direct labor hours for year		14800
Estimated machine hours for year	23850
Estimated direct labor hours Rate	22
Estimated machine hours Rate		78.00
Actual factory overhead costs for March	41940	99590
Actual direct labor hours for March		1330
Actual machine hours for March	1860
Actual Direct labour rate for March		74.88
Actual machine hours Rate for March	22.55
a. Determine the factory overhead rate for Factory 1 $ per machine hour	22.55
b. Determine the factory overhead rate for Factory 2 $ per direct labor hour		74.88
c. Journalize the entries to apply factory overhead to production in each factory for March.
i)    Factory 1 Account                                       DR	41940
PRODUCTION OVERHEAD ACCOUNT      DR	41940
(Being Production overhead transferred to Factory 1 Account)
ii)    Factory 2 Account                                       DR	99590
PRODUCTION OVERHEAD ACCOUNT      DR	99590
(Being Production overhead transferred to Factory 2 Account)
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
Total Actual overhead for the year on the basis of March actual rate per machine hour(23850x22.55)	537779
Estimated overhead of Factory 1	524700
Over applied	13079
Factory 2
Total Actual overhead for the year on the basis of March actual rate per Direct Labour hour(14800x74.88)	1108220
Estimated overhead of Factory 2	1154400
Under applied	46180