 Business
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

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