Question

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	$1,337,500	$847,000
Estimated direct labor hours for year		24,200
Estimated machine hours for year	53,500
Actual factory overhead costs for March	$108,410	$96,900
Actual direct labor hours for March		2,720
Actual machine hours for March	4,400

Required:

A.	Determine the factory overhead rate for Factory 1.
B.	Determine the factory overhead rate for Factory 2.
C.	Journalize the Mar. 31 entries to apply factory overhead to production in each factory for March. 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 March 31 and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead. Enter your answer as a positive number.

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 Mar. 31 entry to apply factory overhead to production in Factory 1 for March. Refer to the Chart of Accounts for exact wording of account titles. Scroll down to record the entry for Factory 2.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2

Now journalize the second Mar. 31 entry to apply factory overhead to production in Factory 2 for March. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
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. Enter your answer as a positive number.

Factory 1
Factory 2

Please Answer all parts.

Answer 1

According to the scenario, computation of the given data are as foolws:

(a).

Factory1 OH rate = Estimated factory overhead cost / Estimated machine hours for year

By putting the value, we get

Factory 1 OH rate = $1,337,500 / 53,500

= 25

b).

Factory 2 OH rate = Estimated factory overhead cost / Estimated direct labor hours for year

By putting the value, we get

Factory 2 OH rate = $847,000 / 24,200

= 35

(c).

Journal Entry For Factory 1

Work in process $110,000

(4,400 * 25)

Factory OH $110,000

( Being factory overhead to production is recorded)

Journal Entry For factory 2

Work in process $95,200

(2,720 * 35)

Factory OH $95,200

( Being factory overhead to production is recorded)

(d).

	Factory 1	Factory 2
Machine Hours	4,400 Hours
Direct Labor Hours		2,720 Hours
Factory OH Rate	25	35
Applied Factory OH	110,000	95,200
Actual Factory OH	108,410	96,900
OH Result	Over Applied	Under Applied
Ending Balance	1,590	1,700
	Credit Balance	Debit Balance