Question

4. 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 $130,000 and total direct labor costs would be $100,000. During May, the actual direct labor cost totaled $12,000 and factory overhead cost incurred totaled $15,950.

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?

CHART OF ACCOUNTS

Kenner Beverage Co.

General Ledger

ASSETS 110 Cash 121 Accounts Receivable 125 Notes Receivable 126 Interest Receivable 131 Materials 141 Work in Process-Blending Department 142 Work in Process-Filling Department 151 Factory Overhead-Blending Department 152 Factory Overhead-Filling Department 161 Finished Goods 171 Supplies 172 Prepaid Insurance 173 Prepaid Expenses 181 Land 191 Factory 192 Accumulated Depreciation-Factory LIABILITIES 210 Accounts Payable 221 Utilities Payable 231 Notes Payable 236 Interest Payable 251 Wages Payable EQUITY 311 Common Stock 340 Retained Earnings 351 Dividends

Answer 1

Answer
a)	Predetermined factory overhead
	Factory overhead cost / labor cost
	$130000/100000
	130%
b)	Application of factory overhead
	Labor cost	$                                       12,000
	Factory overhead	$                                       15,600
	($12000*130%)
			Debit	Credit
	Working in progress - Blending Department		$     15,600
	Factory overhead blending department			$     15,600
c)	Balance in factory overhead blending department
	Overhead Incurred	$                                       15,950
	Less:
	Overhead Applied	$                                       15,600
	Balance	$                                            350
	It is under applied of overhead hence Debit Balance
d)	Underapplied.