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
b. Determine the factory overhead rate for Factory 2.
$ per direct labor hour
c. Journalize the entries to apply factory overhead to production in each factory for March.
|Factory 1||Work in Process|
|Factory 2||Work in Process|
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.
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
|1.||Work in process (610000 x $21.50)||$13115000|
|2.||Work in process (245000 x $40.80)||$9996000|
d. Factory 1 = $12,990,000 – $13,115,000 = $125000 Credit Overapplied
Factory 1 = $10,090,000 – $9,996,000 = $94000 Debit Underapplied