Question

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lculator Instruction Chart of Accounts Factory Overhead General Journal Х Instruction Winston Company estimates that the factory overhead for the following year will be $868,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 28,000 hours. The total machine hours for the year were 54,800 hours. The actual factory overhead for the year was $1,723,000. Required: a. Determine the total factory overhead amount applied. b. Compute the overapplied or underapplied amount for the year. Enter the amount as a positive value. c. Prepare the journal entry to close Factory Overhead into Cost of Goods Sold. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for spaces or journal explanations. Every line on a journal page is used for debit or credit entries. Do not add explanations or skip a line between journal entries. CNOW journals will automatically indent a credit entry when a credit amount is entered

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Answer 1

First we will calculate pre determined overhead rate as per below:

Pre determined overhead rate = Estimated factory overheads / Estimated machine hours

Pre determined overhead rate = $868000 / 28000 = $31 per machine hour.

(a) Factory overhead amount applied = Pre determined overhead rate * Actual machine hours

Factory overhead amount applied = $31 * 54800 = $1,698,800

(b) When the actual overheads are more than the applied overheads then it is the case of under applied overheads and vice versa.

Under applied overhead = Applied overhead - Actual overhead

Under applied overhead = $1,698,800 - $1,723,000 = $24,200

(c) Required journal entry to transfer under applied overhead to cost of goods sold is:

Debit Cost of goods sold $24,200

Credit Manufacturing overhead control account $24,200

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