Tiny Biggs Company operates two factories. The company applies factory overhead

Question

Tiny Biggs Company operates two factories. The company applies factory overhead to jobs on the basis of machine hours in Factory 1 and on the basis of direct labor hours in Factory 2. Estimated factory overhead costs, direct labor hours, and machine hours are as follows:

Required:

Factory 1 Factory 2 Estimated factory overhead cost for fiscal year beginning September 1 $1,504,500 $914,400 Estimated direct labor hours for year 25,400 Estimated machine hours for year 50,150 Actual factory overhead costs for September $121,580 $107,200 Actual direct labor hours for September 2,930 Actual machine hours for September 4,100

Explanation / Answer

Factory Overhead Rate = Budgeted Factory Overhead Budget Direct Labour Hr A Factory Overhead Rate for Factory 1 = Budgeted Factory Overhead Budget Direct Labour Hr $1,504,500 50150 Hr = $30 per Hr B Factory Overhead Rate for Factory 2 = Budgeted Factory Overhead Budget Direct Labour Hr $914,400 25400Hrs = $36 per Hr Factory 1 Factory 2 C Cost of Production A/c Dr 123000 [4100 Hr* $30/Hr] 105480 [2930H*$30/Hr] To Factory Overhead Cost A/c 123000 105480 Amount($) Amount($) D Actual overhead Incurred for September                                      121,580.00           107,200.00 Overhead Charged to Cost of production on Bugted Basis                                      123,000.00           105,480.00 Difference                                        (1,420.00)                1,720.00 Remark Overabsorbed Overhead Underabsorbed Overhead

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