The Winston Company estimates that the factory overhead for the following year w

Question

The Winston Company estimates that the factory overhead for the following year will be $873,600. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 31,200 hours. The total machine hours for the year was 54,400. The actual factory overhead for the year was $1,545,000. Enter the amount as a positive number.

a. Determine the total factory overhead amount applied.

b. Calculate the over or under applied amount for the year.

c.  Prepare the journal entry to close factory overhead into Cost of Goods Sold.

Explanation / Answer

a. Determine the total factory overhead amount applied.

total factory overhead amount applied = 873600/31200 * 54400 = $1,523,200

b. Calculate the over or under applied amount for the year.

Under applied amount = 1545000-1523200 = $21800

c.  Prepare the journal entry to close factory overhead into Cost of Goods Sold.

Cost of good sold a/c Dr $21800

To Factory overhead $21800

(being remaining balance of factory overhead i.e under applied overhead transfer)

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