a. Factory overhead rate for Factory 1 = estimated factory overhead/estimated machine hours
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(Question and Answer): Factory overhead Rates, Entries, and account Balance. Sundance solar company operates two factories. The company supplies factory ove
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= 12,900,000/600,000
= $21.50 per machine hour
b. Factory overhead rate for Factory 2 = estimated factory overhead/estimated direct labor hours
= 10,200,000/250,000
= $40.80 per direct labor hour
c. Journal entry for factory 1:
Predetermined rate = $21.50 per machine hour. Actual machine hours = 610,000. Thus applied overhead = $21.50*61,000 = $13,115,000
Journal entry would be:
| Particulars |
Debit |
Credit |
| Work in process |
$13,115,000 |
|
| Factory overhead |
|
$13,115,000 |
Factory 2: overhead applied = $40.80 per direct labor hour*245,000 actual hours = $9,996,000
Thus journal entry would be:
| Particulars |
Debit |
Credit |
| Work in process |
$9,996,000 |
|
| Factory overhead |
|
$9,996,000 |
d. Factory 1: actual overheads = 12,990,000. Applied overhead = 13,115,000. Thus applied overhead is greater than actual overhead and so overhead is overapplied. There will be credit balance.
Balance amount for factory 1 = 13,115,000-12,990,000 = $125,000
Factory 2: actuals = 10,000,000. Applied overhead = 9,996,000. Thus applied overhead is less than actual and so overhead is underapplied. There will be a debit balance.
Balance amount = 10,000,000-9,996,000 = $4,000
| Factory 1 |
$ |
125,000.00 |
Overapplied |
| Factory 2 |
$ |
4,000.00 |
Underapplied |
