Factory Overhead Rates, Entries, and Account Balance Montenegro Metal Company operates two factories. The company applies factory overhead to jobs on the basis of machine hours in Factory 1 and on the basis of direct labor hours in Factory 2. Estimated factory overhead costs, direct labor hours, and machine hours are as follows: Factory 1 Factory 2 Estimated factory overhead cost for fiscal year beginning March 1 $12,000,000 $8,360,000 Estimated direct labor hours for year 440,000 Estimated machine hours for year 320,000 Actual factory overhead costs for March $1,012,600 $695,000 Actual direct labor hours for March 36,250 Actual machine hours for March 27,500 a. Determine the factory overhead rate for Factory 1. Round the answer to two decimal places per machine hour b. Determine the factory overhead rate for Factory 2. Round the answer to two decimal places per direct labor hour c. Journalize the entries to apply factory overhead to production in each factory for March. When required, round your answers to the nearest dollar. If an amount box does not require an entry, leave it blank. d. Determine the balances of the factory overhead accounts for each factory as of March 31 and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead. When required, round your answers to the nearest dollar
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Factory
Montenegro Metal Company operates two factories. The company applies factory overhead to jobs on the basis of machine hours in Factory 1 and on the basis of direct labor hours in Factory 2. Estimated
Factory 1 Factory 2
Estimated factory overhead cost for fiscal
year beginning March 1 $12,000,000 $8,360,000
Estimated direct labor hours for year 440,000
Estimated machine hours for year 320,000
Actual factory overhead costs for March $1,012,600 $695,000
Actual direct labor hours for March 36,250
Actual machine hours for March 27,500
a. Determine the factory overhead rate for Factory 1. Round the answer to two decimal places per machine hour
b. Determine the factory overhead rate for Factory 2. Round the answer to two decimal places per direct labor hour
c.
d. Determine the balances of the factory overhead accounts for each factory as of March 31 and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead. When required, round your answers to the nearest dollar.
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