Question & Answer: Sundance Solar Company operates two factories. The company applies factory overhead to jobs on the basis of machine hours in Fa…..

Sundance Solar Company operates two factories. The company applies factory overhead to jobs on the basis of machine hours in Factory 1 and on the basis of direct labor hours in Factory 2. Estimated factory overhead costs, direct labor hours, and machine hours are as follows:

 Factory 1 Factory 2 Estimated factory overhead cost for fiscal year beginning March 1 \$12,900,000 \$10,200,000 Estimated direct labor hours for year 250,000 Estimated machine hours for year 600,000 Actual factory overhead costs for March \$12,990,000 \$10,090,000 Actual direct labor hours for March 245,000 Actual machine hours for March 610,000

a. Determine the factory overhead rate for Factory 1.
\$ per machine hour

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b. Determine the factory overhead rate for Factory 2.
\$ per direct labor hour

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c. Journalize the entries to apply factory overhead to production in each factory for March.

 Factory 1 Work in Process Factory Overhead Factory 2 Work in Process Factory Overhead

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d. Determine the balances of the factory overhead accounts for each factory as of March 31,and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead.

 Factory 1 \$ Credit Overapplied Factory 2 \$ Debit Underapplied

a. Factory overhead rate for Factory 1 = Estimated factory overhead cost / Estimated machine hours for year

= \$12900000 / 600000 = \$21.50

b. Factory overhead rate for Factory 1 = Estimated factory overhead cost / Estimated direct labor hours for year

= \$10200000 / 250000 = \$40.80

c. Journal

 No. Account Name Debit Credit 1. Work in process (610000 x \$21.50) \$13115000 Factory overhead \$13115000 2. Work in process (245000 x \$40.80) \$9996000 Factory overhead \$9996000

d. Factory 1 = \$12,990,000 – \$13,115,000 = \$125000 Credit Overapplied

Factory 1 = \$10,090,000 – \$9,996,000 = \$94000 Debit Underapplied