Question

The Winston Company estimates that the factory overhead for the following year will be $1,216,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 38,000 hours. The total machine hours for the year was 54,900. The actual factory overhead for the year was $1,746,000.

Required:

	(a) Determine the total factory overhead amount applied.
	(b) Calculate the overapplied or underapplied amount for the year. Enter the amount as positive values.
	(c) Prepare the journal entry to close Factory Overhead into Cost of Goods Sold. Refer to the Chart of Accounts for exact wording of account titles.

Chart of Accounts

CHART OF ACCOUNTS
Winston Company
General Ledger
ASSETS 110 Cash 121 Accounts Receivable 131 Materials 133 Work in Process 135 Factory Overhead 137 Finished Goods 141 Supplies 142 Prepaid Expenses 181 Land 190 Factory Equipment 191 Accumulated Depreciation LIABILITIES 210 Accounts Payable 221 Utilities Payable 251 Wages Payable EQUITY 311 Common Stock 340 Retained Earnings 351 Dividends 390 Income Summary	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Goods Sold 520 Wages Expense 531 Insurance Expense 532 Utilities Expense 533 Office Supplies Expense 560 Depreciation Expense 590 Miscellaneous Expense 710 Interest Expense

Factory Overhead

(a) Determine the total factory overhead amount applied.

Total factory overhead applied

(b) Calculate the overapplied or underapplied amount for the year. Enter the amount as positive values.

Factory overhead by

General Journal

(c) Prepare the journal entry to close Factory Overhead into Cost of Goods Sold on December 31. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2

Answer 1

Predetermined Overhead rate per machine hour = Estimated Overhead / estimated Machine hours

= 1216,000 / 38000 = 32 per hour

Question - (a) Determine the total factory overhead amount applied.

In the above calculation 32 per hour means, for each actual hour we work in the factory, $32 overhead shall be applied. It was given that 54,900 hours were actually worked in that year.

Factory overhead applied = 32 * 54900 = 1756,800

Question - (b) Calculate the overapplied or underapplied amount for the year. Enter the amount as positive values.

As against actual overhead of 1746,000 we applied overhead of 1756,800 as factory overhead.

So Factory overhead over-applied = 1756,800 - 1746,000 = 10,800

Question - (c)

	Date	Description	Post.Ref	Debit	Credit
	Dec 31	Factory Overhead		10800
		Cost of goods sold			10800

Post.Ref ......... can be left blank. Generally it for posting the page number of the ledger where the journal will be posted.

Your rating helps me .......... thank you