Reference no: EM132465550

The controller has asked you to distribute and record factory overhead to the various production orders that are processed during a year.

The following information was taken from the annual budget:

Direct labor hours                         84,000

Machine hours                            120,000

Manufacturing costs:

Direct labor                              $525,000

Direct materials                         180,000

Indirect labor                              75,000

Electric power                             48,000

Payroll taxes                               12,600

Machine maintenance and repair        9,200

Factory supplies                           16,000

Factory heat and light                    14,000

Depreciation, taxes, and insurance:

Factory buildings                           135,000

Machinery                                      320,200

                                                   $1,335,000

Actual results for the year follow:

Direct labor hours                              85,000

Machine hours                               110,000

Manufacturing costs:

Direct labor                                $ 540,000

Direct material                              200,000

Factory overhead                           625,000

                                                    $1,365,000

Required:

Question a. Determine the factory overhead application rate under the direct labor hour method (show calculations).

Question b. Determine the under- or over-applied factory overhead (show calculations).

Question c. Prepare the entries to record the following:

1. The liability for total factory overhead.

2. Application of factory overhead to work in process, using direct labor hours.

3. Close the applied factory overhead account.

4. Record under- or over-applied factory overhead and close actual factory overhead.

5. Close the under- or over-applied factory overhead assuming the balance is immaterial.