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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Factory overhead rate, entry for applying factory overhead, and factory overhead account balance

The chief cost accountant for Kenner Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year beginning May I would be $5,000,000 and total direct labor costs would be $2,400,000. During May, the actual direct labor com totaled $198,400 and factory overhead cost incurred totaled $253,200.

a. What is the predetermined factory overhead rate based on direct labor cost'

b. Journalize the entry to apply factory overhead to production for May.

c. What is the May 31 balance of the account Factory Overhead—Blending Department?

d. Does tike balance in part (c) represent over- or underapplied factory overhead?

(a)

To determine

Process costs

It is a method of cost accounting, which is used where the production is continuous, and the product needs various processes to complete. This method is used to ascertain the cost of the product at each process or stage of production.

To Identify: The predetermined factory overhead rate based on direct labor cost of Company KB.

Explanation

Calculate predetermined factory overhead rate based on direct labor cost of Company KB as shown below:

Predetermined overhead rate =Total factory overhead costsTotal direct labor costs×100=

(b)

To determine

To Prepare: The journal entry to record factory overhead for production during May month of Company KB.

(c)

To determine

To Identify: The ending balance of factory overhead – blending department of Company KS.

(d)

To determine

To Identify: the factory overhead would be over applied or under applied of Company KS.

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