The controller has asked you to distribute and record factory overhead to the various production orders that are processed during a year.
The following information was taken from the annual budget:
Direct labor hours...................................................84,000
Machine hours......................................................120,000
Manufacturing costs:
Direct labor........................................................$525,000
Direct materials.....................................................180,000
Indirect labor.........................................................75,000
Electric power........................................................48,000
Payroll taxes.........................................................12,600
Machine maintenance and repair....................................9,200
Factory supplies......................................................16,000
Factory heat and light...............................................14,000
Depreciation, taxes, and insurance:
Factory buildings...................................................135,000
Machinery...........................................................320,200
....................................................................$1,335,000
Actual results for the year follow:
Direct labor hours...................................................85,000
Machine hours......................................................110,000
Manufacturing costs:
Direct labor......................................................$ 540,000
Direct material......................................................200,000
Factory overhead...................................................625,000
....................................................................$1,365,000
Required:
a. Determine the factory overhead application rate under the direct labor hour method (show calculations).
b. Determine the under- or over-applied factory overhead (show calculations).
c. Prepare the entries to record the following:
1. The liability for total factory overhead.
2. Application of factory overhead to work in process, using direct labor hours.
3. Close the applied factory overhead account.
4. Record under- or over-applied factory overhead and close actual factory overhead.
5. Close the under- or over-applied factory overhead assuming the balance is immaterial.
The controller has asked you to distribute and record factory overhead to the various production orders that are processed during a year.
The following information was taken from the annual budget:
Direct labor hours......................................................84,000
Machine hours.........................................................120,000
Manufacturing costs:
Direct labor...........................................................$525,000
Direct materials........................................................180,000
Indirect labor............................................................75,000
Electric power...........................................................48,000
Payroll taxes.............................................................12,600
Machine maintenance and repair.......................................9,200
Factory supplies.........................................................16,000
Factory heat and light...................................................14,000
Depreciation, taxes, and insurance:
Factory buildings......................................................135,000
Machinery...............................................................320,200
........................................................................$1,335,000
Actual results for the year follow:
Direct labor hours.......................................................85,000
Machine hours.........................................................110,000
Manufacturing costs:
Direct labor..........................................................$ 540,000
Direct material.........................................................200,000
Factory overhead......................................................625,000
........................................................................$1,365,000
Required:
a. Determine the factory overhead application rate under the direct labor hour method (show calculations).
b. Determine the under- or over-applied factory overhead (show calculations).