Factory Overhead Rates, Entries, and Account Balance Hudson Company operates two

Question

Factory Overhead Rates, Entries, and Account Balance

Hudson 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:

a. Determine the factory overhead rate for Factory 1.
$ per machine hour

b. Determine the factory overhead rate for Factory 2.
$ per direct labor hour

c. Journalize the entries to apply factory overhead to production in each factory for June.

Factory 1

Factory 2

d. Determine the balances of the factory overhead accounts for each factory as of June 30, and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead.

Factory 1 Factory 2 Estimated factory overhead cost for fiscal year beginning June 1 $571,090 $620,600 Estimated direct labor hours for year 10,700 Estimated machine hours for year 24,830 Actual factory overhead costs for June $45,740 $53,450 Actual direct labor hours for June 960 Actual machine hours for June 1,940

Explanation / Answer

Overhead Rate Per Hour Particulars Total OH Estimated Machine & Labour Hrs Estimated Rate per Hr Factory 1 (Machine Hrs)         571,090                24,830                23 Factory 2 (Labour Hrs)         620,600                10,700                58 Actuals in June Machine Hrs             1,940 Labour Hrs                960 Factory 1 Overhead 1940*23                44,620 Factory 2 Overhead 960*58                55,680 Journal Entry Debit Credit Factory Ref Work in Progress           44,620 Factory 1    To Manufacturing Overheads                44,620 Work in Progress           55,680 Factory 2    To Manufacturing Overheads                55,680 Balances of Factory Overheads Factory - 1 $ Standarad Application                44,620 Actual Incurred                45,740 Under Applied/Absorbed/ Balance in OH Account                  1,120 Charged to PL (Under Absorbed Portion)                  1,120 Factory - 2 $ Standarad Application                55,680 Actual Incurred                53,450 Over Applied/Absorbed/ Balance in OH Account                (2,230) Charged to PL (Over Absorbed Portion)                (2,230)

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