Factory Overhead Rate, Entry for Applying Factory Overhead, and Factory Overhead

Question

Factory Overhead Rate, Entry for Applying Factory Overhead, and Factory Overhead Account Balance

The cost accountant for Kenner Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year beginning May 1 would be $638,400, and total direct labor costs would be $532,000. During May, the actual direct labor cost totaled $46,000, and factory overhead cost incurred totaled $57,400.

a. What is the predetermined factory overhead rate based on direct labor cost? Enter your answer as a whole percent not in decimals.
%

b. Journalize the entry to apply factory overhead to production for May.

c. What is the May 31 balance of the account Factory Overhead—Blending Department?

d. Does the balance in part (c) represent overapplied or underapplied factory overhead?

Explanation / Answer

Predetermined factory overhead rate = $638400/$532000 = 120% of Direct Labour cost

b)

Ans:       Actual Direct labour cost is $46000*1.20=$55200

                Journal Entry   

Work in Process-Blending Department $55200

           Factory Overhead-Blending Department                   $55200

C Ans:                                               

May 31 balance = $57400-$55200 = $2200 debit balance                 

D Ans:                                 

Underapplied overhead ( Because of debit balance ,,If it is credit balance then over applied)                                    

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