Darling company estimates that total factory overhead costs will be $130,000 for the year,

General
1

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

2

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. 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 overhead rate

Answer:

To address the given problem systematically, we’ll follow each part step-by-step.

a. Predetermined Factory Overhead Rate

The predetermined factory overhead rate is calculated by dividing the estimated total factory overhead costs by the estimated total direct labor hours.

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

Given:

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

Applying the values:
\text{Predetermined Factory Overhead Rate} = \frac{130,000}{26,000}

\text{Predetermined Factory Overhead Rate} = \$5 \text{ per direct labor hour}

b. Factory Overhead Applied to Jobs 200 and 305 in May

To determine the amount of factory overhead applied to each job, we multiply the predetermined factory overhead rate by the actual direct labor hours accumulated for each job.

For Job 200:

  • Direct Labor Hours (Job 200) = 890 hours

Applying the predetermined rate:
\text{Factory Overhead Applied (Job 200)} = 890 \text{ hours} \times \$5/\text{hour} = \$4,450

For Job 305:

  • Direct Labor Hours (Job 305) = 530 hours

Applying the predetermined rate:
\text{Factory Overhead Applied (Job 305)} = 530 \text{ hours} \times \$5/\text{hour} = \$2,650

c. Journal Entry to Apply Factory Overhead to Both Jobs in May

To apply the factory overhead to both jobs, we combine the factory overheads calculated for Jobs 200 and 305.

Total Factory Overhead Applied in May:
\text{Total Factory Overhead Applied} = \$4,450 (Job 200) + \$2,650 (Job 305) = \$7,100

Journal Entry:
The journal entry to record the application of factory overhead would be:

\begin{aligned} \text{Date} & \text{Account Title} & \text{Debit} & \text{Credit} \\ \hline \text{May} & \text{Work in Process Inventory} & \$7,100 & & \\ & \text{Factory Overhead} & & \$7,100 & \\ \end{aligned}

The journal entry debits the Work in Process Inventory for the total overhead applied and credits the Factory Overhead account.

By following these steps, we have determined the predetermined overhead rate, applied the factory overhead to specific jobs, and prepared the corresponding journal entry, all based on the given estimates and actual labor hours.