Darling company estimates that total factory overhead costs will be $130,000 for the year, direct labor hours are estimated to be 26,000 a. for darling company,

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darling company estimates that total factory overhead costs will be $130,000 for the year, direct labor hours are estimated to be 26,000 a. for darling company, determine the predetermined factory overhead rate using direct labor hours as the activity base. per direct labor hour b. during may, darling company accumulated 890 hours of direct labor costs on job 200 and 530 hours on job 305. determine the amount of factory overhead applied to jobs 200 and 305 in may. c. prepare the journal entry to apply factory overhead to both jobs in may according to the predetermined overheed rate

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LectureNotes said Darling company estimates that total factory overhead costs will be $130,000 for the year, direct labor hours are estimated to be 26,000. a. For Darling Company, determine the predetermined factory overhead rate using direct labor hours as the activity base. b. During May, Darling Company accumulated 890 hours of direct labor costs on job 200 and 530 hours on job 305. Determine the amount of factory overhead applied to jobs 200 and 305 in May. c. Prepare the journal entry to apply factory overhead to both jobs in May according to the predetermined overhead rate.

Answer:
Let’s break down and solve each part of the problem step by step.

a. Determine the predetermined factory overhead rate using direct labor hours as the activity base.

To determine the predetermined overhead rate, you divide the total estimated factory overhead costs by the total estimated direct labor hours.

\text{Predetermined Overhead Rate} = \frac{\text{Total Factory Overhead Costs}}{\text{Total Direct Labor Hours}}

Given:

  • Total Factory Overhead Costs = $130,000
  • Total Direct Labor Hours = 26,000

Calculating the rate:

\text{Predetermined Overhead Rate} = \frac{\$130,000}{26,000 \text{ hours}} = \$5 \text{ per direct labor hour}

So, the predetermined factory overhead rate is $5 per direct labor hour.

b. Determine the amount of factory overhead applied to jobs 200 and 305 in May.

Given:

  • Direct labor hours for Job 200 = 890 hours
  • Direct labor hours for Job 305 = 530 hours

Using the predetermined overhead rate of $5 per direct labor hour:

  1. Factory Overhead Applied to Job 200:
\text{Factory Overhead for Job 200} = 890 \text{ hours} \times \$5 \text{ per hour} = \$4,450
  1. Factory Overhead Applied to Job 305:
\text{Factory Overhead for Job 305} = 530 \text{ hours} \times \$5 \text{ per hour} = \$2,650

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

To apply the factory overhead, we debit the Work in Process (WIP) account and credit the Factory Overhead account.

Journal Entry:

Date Account Name Debit Credit
May XX Work in Process (WIP) 7,100
Factory Overhead 7,100

Explanation:

  • Total Factory Overhead Applied = $4,450 (Job 200) + $2,650 (Job 305) = $7,100

By applying the factory overhead to the respective jobs, the Work in Process account is increased, and the Factory Overhead account is decreased by the respective amounts.