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19 April, 08:14

Cavy Company estimates that total factory overhead costs will be $660,000 for the year. Direct labor hours are estimated to be 100,000. Required:Determine (a) the predetermined factory overhead rate; (b) the amount of factory overhead applied to Job 345 if the amount of direct labor hours is 560 and Job 777 if the amount of direct labor hours is 800; and (c) prepare the journal entry to apply factory overhead for April according to the predetermined overhead rate. Refer to the Chart of Accounts for exact wording of account titles.

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  1. 19 April, 08:32
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    (A) $6.6

    (B) $3,696, $5,280

    (C) Work in Progress A/c Dr $8,976

    To Factory overhead A/c $8,976

    (Being the factory overhead applied)

    Explanation:

    (A) The formula to compute the predetermined factory overhead rate is shown below:

    Predetermined factory overhead rate = (Total estimated factory overhead) : (estimated direct labor-hours)

    = $660,000 : 100,000 hours

    = $6.6

    (B) The amount of factory overhead for each job is shown below:

    For Job 345 = Actual direct labor-hours * predetermined factory overhead rate

    = 560 hours * $6.6

    = $3,696

    For Job 777 = Actual direct labor-hours * predetermined factory overhead rate

    = 800 hours * $6.6

    = $5,280

    (C) The journal entry is shown below:

    Work in Progress A/c Dr $8,976

    To Factory overhead A/c $8,976

    (Being the factory overhead applied)

    The computation is shown below:

    = Applied factory overhead for Job 345 + Applied factory overhead for Job 777

    = $3,696 + $5,280

    = $8,976
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