Question

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

The cost accountant for River Rock Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year beginning February 1 would be $3,150,000, and total direct labor costs would be $1,800,000. During February, the actual direct labor cost totaled $160,000, and factory overhead cost incurred totaled $283,900.

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

Feedback

Identify the activity base for this company. Remember to enter the number as a whole percent not in decimals.

b. Journalize the entry to apply factory overhead to production for February. If an amount box does not require an entry, leave it blank.

Feedback

Recall how the predetermined overhead is applied to departments. How does the applied overhead affect work in process?

c. What is the February 28 balance of the account Factory Overhead—Blending Department?

Amount:	$
Debit or Credit?

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

Answer 1

Solution a:

Predetermined overhead rate = $3150000/ $1800000 = 175%

Solution b:

Particulars	Debit	Credit
Work in process inventory ($160000*175%)	$2,80,000.00
factory overhead		$2,80,000.00

Solution c:

February 28 balance of the account Factory Overhead = Actual overhead - Applied overhead = $283900 - $280000 = $3,900

Debit or Credit? = Debit

Solution d:

the balance in part (c) represent underapplied factory overhead.