Question

Bergan Company estimates that total factory overhead costs will be $620,000 for the year. Direct labor hours are estimated to be 80,000.

Required:

	a. For Bergan Company, determine the predetermined factory overhead rate using direct labor hours as the activity base.
	b. During May, Bergan Company accumulated 2,500 hours of direct labor costs on Job 200 and 3,000 hours on Job 305. Determine the amount of factory overhead applied to Jobs 200 and 305 in May.
	c. Prepare the journal entry on May 31 to apply factory overhead to both jobs in May according to the predetermined overhead rate. Refer to the Chart of Accounts for exact wording of account titles.

Chart of Accounts

CHART OF ACCOUNTS
Bergan Company
General Ledger
ASSETS 110 Cash 121 Accounts Receivable 125 Notes Receivable 126 Interest Receivable 131 Materials 132 Work in Process 133 Factory Overhead 134 Finished Goods 141 Supplies 142 Prepaid Insurance 143 Prepaid Expenses 181 Land 191 Factory 192 Accumulated Depreciation-Factory LIABILITIES 210 Accounts Payable 221 Utilities Payable 231 Notes Payable 236 Interest Payable 241 Lease Payable 251 Wages Payable 252 Consultant Fees Payable EQUITY 311 Common Stock 340 Retained Earnings 351 Dividends 390 Income Summary	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Goods Sold 520 Wages Expense 531 Selling Expenses 532 Insurance Expense 533 Utilities Expense 534 Office Supplies Expense 540 Administrative Expenses 560 Depreciation Expense-Factory 590 Miscellaneous Expense 710 Interest Expense

Factory Overhead

a. For Bergan Company, determine the predetermined factory overhead rate using direct labor hours as the activity base.

per direct labor hour

b. During May, Bergan Company accumulated 2,500 hours of direct labor costs on Job 200 and 3,000 hours on Job 305. Determine the amount of factory overhead applied to Jobs 200 and 305 in May.

Journal

c. Prepare the journal entry on May 31 to apply factory overhead to both jobs in May according to the predetermined overhead rate. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2

Answer 1

a)	Predetermined factory overhead rate = 620000/80000 =	$            7.75	per DLH
b)	Overhead applied to Job 200 = 2500*7.75 =	$       19,375
	Overhead applied to Job 305 = 3000*7.75 =	$       23,250
	Total overhead applied	$       42,625
c)	Work in process	$       42,625
	Factory overhead		$     42,625