Sundance Solar Company operates two factories. The company applies factory overh

Question

Sundance Solar 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: Factory 2 $912,600 25,350 Factory 1 Estimated factory overhead cost for fiscal year beginning March 1 Estimated direct labor hours for year Estimated machine hours for year Actual factory overhead costs for March Actual direct labor hours for March Actual machine hours for March $1,442,000 51,500 $115,110 $103,210 2,820 4,160

Explanation / Answer

Factory 1 Factory 2 Base for Allocation of Fixed OH Machine Hours Direct Labor Hours Estimated Factory OH 14,42,000 912600 Machine Hours 51500 Direct Labor Hours 25350 Predetermined OH Rate 28.00 36.00 (1442000/51500) (912600/25350) A B C Factory1: Work in Progress Account Dr. 1,16,480 To Manufacturing Overhead 1,16,480 (Being Fixed OH Applied) Factory2: Work in Progress Account Dr. 1,01,520 To Manufacturing Overhead 1,01,520 (Being Fixed OH Applied) D Factory 1 Factory 2 Machine Hours 4160 Direct Labor Hours 2820 Predetermined OH Rate 28.00 36.00 Applied Factory OH 1,16,480 1,01,520 Actual Factory OH 1,15,110 1,03,210 OH Result Over Applied Under Applied Ending Balance 1,370 1,690 Credit Balance Debit Balance

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