Determining Actual Factory Overhead The books of Petry Products Co. revealed tha

Question

Determining Actual Factory Overhead The books of Petry Products Co. revealed that the following general journal entry had been made at the end of the current accounting period: Factory Overhead 2,000 2,000 Under- and Overapplied Factory Overhead Closed credit balance in factory overhead control account. The total direct materials cost for the period was $40,000. The total direct labor cost, at an average rate of $10 per hour for direct labor, was one and one-half times the direct materials cost. Factory overhead was applied on the basis of $4 per direct labor hour. What was the total actual factory overhead incurred for the period?(Hint: First solve for direct labor cost and then for direct labor hours.)

Explanation / Answer

Petry Products Company

Answer: $22,000

Direct labor cost = 1.5 times direct materials cost = 1.5 x $40000 = $60000

Direct labor rate = $10 per direct labor hour

Number of direct labor hours = Direct labor cost / Direct labor rate = $60000 / $10 = 6000

Factory overhead rate = $4 per direct labor hour

Factory overhead applied = $4 x 6000 = $24000

Over applied factory overhead = $2000

Factory overhead incurred = $24000 - $2000 = $22000

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