Applying Factory Overhead Jernigan Company estimates that total factory overhead

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Applying Factory Overhead

Jernigan Company estimates that total factory overhead costs will be $80,000 for the year. Direct labor hours are estimated to be 16,000.

a. For Jernigan Company, determine the predetermined factory overhead rate using direct labor hours as the activity base. If required, round your answer to two decimal places.
$ per direct labor hour

b. During August, Jernigan Company accumulated 510 hours of direct labor costs on Job 40 and 730 hours on Job 42. Determine the amount of factory overhead applied to Jobs 40 and 42 in August.
$

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a. Determine the rate by spreading the estimated overhead costs over the allocation base.

b. Multiply the job hours by the predetermined overhead rate.

c. Prepare the journal entry to apply factory overhead to both jobs in August according to the predetermined overhead rate.

Work in Process Factory Overhead

Explanation / Answer

a) Overhead rate = 80000/16000 = 5 per labour hour

b) Overhead for job 40 = 510*5 = 2550

Overhead for job 42 = 730*5 = 3650

c. Prepare the journal entry to apply factory overhead to both jobs in August according to the predetermined overhead rate.

Date accounts & explanation debit credit Work in proces 6200      Factory overhead (2550+3650) 6200

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