Question

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

The cost accountant for Kenner Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year beginning May 1 would be $670,800, and total direct labor costs would be $516,000. During May, the actual direct labor cost totaled $44,000, and factory overhead cost incurred totaled $59,500.

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

b. Journalize the entry to apply factory overhead to production for May.

	Work in Process-Blending Department
	Factory Overhead-Blending Department

c. What is the May 31 balance of the account Factory Overhead—Blending Department?

Amount:	$
Debit or Credit?	Debit

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

Answer 1

Solution a:

Predetermined factory overhead rate = Estimated Total Overhead / Estimated Direct labor cost = $670800 / $516000 = 130%

Solution b:

Journal Entry
S. No	Particulars	Debit	Credit
b.	Work in Process-Blending department Dr ($44000*130%)	$57,200.00
	To Factory Overhead- Blending Department		$57,200.00

Solution c:

Factory Overhead- Blending Department
Cost incurred	$59,500	Applied	$57,200
May 31 Balance	$2,300

Amount = $2300 (Debit)

Solution d:

Balance in part (c) represent "Underapplied factory overhead".