(Solved): Factory overhead Rates, Entries, and account Balance. Sundance solar company operates two factories. The company supplies factory ove

Calculator Factory Overhead Rates, Entries, and Account Balance Sundance Solar Company operates two factories. The company machine hours are as follows: 1 basis of direct labor hours in Factory 2. Estimated factory overhead coots, direct lubor hours Factory 1 Factory 2 Estimated factory overhead cost for fiscal year beginning March Estimated direct labor hours for year Estimated machine hours for year Actual factory overhead costs for March Actual direct labor hours for March Actual machine hours for March a. Determine the factory overhead rate for Factory1 $10,200,000 250,000 $12,990,000 10,090,000 245,000 10,000 per machine hour b. Determine the factory overhead rate for Factory 2 per direct labor hour C. Jourmalize the entries to apply factory overhead to production in each factory for March Factory 1 Factory 2 nderapplied factory overhead d. Determine the balances of the factory overhead accounts for each factory as of March 31 and indicate Factory Factory 2 f whether the amounts represent everasolied factory overhead or wok saved

Factory overhead Rates, Entries, and account Balance. Sundance solar company operates two factories. The company supplies factory overhead to jobs on the basis of machine hours in factory. 1 and basis of direct labor hours in factory 2. Estimated factory overhead costs, direct labor hours, machine hours are as follows: 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 entries to apply factory overhead to production is each factory for March. d. Determine the balance of the factory overhead accounts for each factory as March 31, and indicate whether the represent overhead or under applied factory overhead.

Expert Answer

 

a. Factory overhead rate for Factory 1 = estimated factory overhead/estimated machine hours

= 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
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