Question

Applying Factory Overhead

Salinger Company estimates that total factory overhead costs will be $175,000 for the year. Direct labor hours are estimated to be 25,000.

a. For Salinger Company, determine the predetermined factory overhead rate using direct labor hours as the activity base. If required, round your answer to two decimal places.
$ per direct labor hour

b. During August, Salinger Company accumulated 590 hours of direct labor costs on Job 40 and 840 hours on Job 42. Determine the amount of factory overhead applied to Jobs 40 and 42 in August.
$

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a. Determine the rate by spreading the estimated overhead costs over the allocation base.

b. Multiply the job hours by the predetermined factory overhead rate.

c. Prepare the journal entry to apply factory overhead to both jobs in August according to the predetermined overhead rate.

	Work in Process
	Factory Overhead

2)  

Job Costs

At the end of August, Ellis Company had completed Jobs 40 and 42. Job 40 is for 500 units, and Job 42 is for 200 units.

The following data relate to these two jobs:

On August 4, raw materials were requisitioned for production as follows: 700 units for Job 40 at $24 per unit and 1,300 units for Job 42 at $14 per unit.

During August, Ellis Company accumulated 200 hours of direct labor costs on Job 40 and 1,100 hours on Job 42. The total direct labor was incurred at a rate of $18 per direct labor hour for Job 40 and $24 per direct labor hour for Job 42.

The predetermined factory overhead rate is $15.00 per direct labor hour.

a. Determine the balance on the job cost sheets for Jobs 40 and 42 at the end of August.

Job 40	$
Job 42	$

b. Determine the cost per unit for Jobs 40 and 42 at the end of August. If required, round your answers to the nearest cent.

Job 40	$
Job 42	$

Answer 1

Answer:
(a)
Predetrmined factory overhead rate         =   Estimated Factory Overhead Costs /Estimated Direct labor Hours         =   $ 175,000 / 25,000 DLH        =   $ 7 per direct labor hours	$ 7 per direct labor hour
(b)
Particulars	Amount (in $ )
Applied Factory overhead - Job 40 ( 590 Hours x $ 7 )	$ 4,130
Applied Factory overhead - Job 42 ( 840 Hours x $ 7)	$ 5,880
Total Factory overhead applied	$ 10,010
(c )
Accounts title and explanations	Debit (in $)	Credit (in $)
Work in process	$ 10,010
Factory Overhead		$ 10,010
(To record the applied factory overhead)

2)
(a)
Particulars	Job 40	Job 42
Direct material	$ 16,800 ( 700 Units x $ 24)	$ 18,200 ( 1,300 Units x $ 14)
Direct labour	$ 3,600 ( 200 hours x $ 18)	$ 26,400 ( 1,100 hours x $ 24)
Overhead applied	$ 3,000 ( 200 hours x $ 15)	$ 16,500 ( 1,100 hours x $ 15)
Total Cost	$ 23,400	$ 61,100
(b)
Cost per Unit - Job 40	Total Cost / Balance Units = $ 23,400 / 500 Units	$ 46.80 per Unit
Cost per Unit - Job 42	Total Cost / Balance Units = $ 61,100 / 200 Units	$ 305.50 per Unit