The chief cost accountant for Fizzy Fruit Beverage Co. estimated that total fact
ID: 2418447 • Letter: T
Question
The chief cost accountant for Fizzy Fruit Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year beginning April 1 would be $130,000, and total direct labor costs would be $100,000. During April, the actual direct labor cost totaled $12,000, and factory overhead cost incurred totaled $15,950.
A. What is the predetermined factory overhead rate based on direct labor cost? (percentage)
130,000/100,000=1.30 or 130%
B. On April 30, journalize the entry to apply factory overhead to production.
Work in Process (Debit) - $15,600
Factory Overhead (Credit) - $15,600
What is the April 30 balance of the account Factory Overhead-Blending Department?
-$350 (credit)
Does the balance in C. represent over- or underapplied factory overhead?
underapplied factory overhead
Explanation / Answer
A./
PREDETERMINED OVERHEAD RATE(EASTIMETED OVERHEAD COST / EASTIMETED DIRECT LABOURCOST)
=$130000 / $100000
=$1.30 PER $1 OF LABOUR COST OR 130%OF LABOUR COST
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B./
JOURNAL ENTRY
WORK IN PROCESS A/C...............................DR $15600
TO FACTORY OVERHEAD A/C $15600
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C./
ACTUAL FACTORY OVERHEAD INCURRED = $15950
LESS FACTORY OVERHEAD APPLIED ($12000 * $1.3) = ($15600)
BALANCE IN FACTORY OVERHEAD = $350 CREDIT BALANCE
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D./
THE OVERHEAD APPLIED IS LESS THAN THE ACTUAL OVERHEAD INCURRED SO IT SIMPLY SHOWS THAT THE FACTROY OVERHEAD IS UNDER APPLIED.
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