Question

Instruction Winston Company estimates that the factory overhead for the following year will be $1,148,400. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 39,600 hours. The total machine hours for the year were 54,600 hours. The actual factory overhead for the year was $1,606,000. 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.

Answer 1

Based on the information available in the question, we can answer as follows:-

Requirement 1:-

Predetermined overhead rate = Estimated Factory Overheads/Estimated machine hours

=$1,148,400/39,600 hours

Predetermined overhead rate = $29 per machine hour.

Requirement 2:-

Factory Overhead amount applied = $29 * 54,600 hours = $1,583,400

Overapplied (Underapplied) overhead = Applied Overheads - Actual overheads

=$1,583,400 - $1,606,000

Underapplied Overheads = $22,600

Since the applied overheads is lesser than the actual overheads, the overheads are Underapplied.

Requirement 3:-

The journal entry to record the Under-applied overheads is as follows:-

Particulars	Amount	Amount
Cost of Goods sold A/c	22,600
To Factory Overheads A/c		22,600
(To record the underapplied overheads)

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