Question

Factory Overhead Rates, Entries, and Account Balance Sundance Solar 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 $12,900,000 - $10,200,000 Estimated direct labor hours for year 250,000 Estimated machine hours for year 600,000 Actual factory overhead costs for March $12,990,000 - $10,090,000 Actual direct labor hours for March 245,000 Actual machine hours for March 610,000 a. Determine the factory overhead rate for Factory 1. $ per machine hour b. Determine the factory overhead rate for Factory 2. $ per direct labor hour

Answer 1

Answer:

A) $21.50 per machine hour

B) $40.80 per direct labor hour

Explanation:

A) factory 1 overhead ⇒ on the basis of direct machine hours.

overhead rate factory 1 = estimated total overhead costs factory 1 / estimated machine hours

= $12,900,000 / 600,000 machine hours = $21.50 per machine hour

B) factory 2 overhead ⇒ on the basis of direct labor hours.

overhead rate factory 2 = estimated total overhead costs factory 1 / estimated labor hours

= $10,200,000 / 250,000 labor hours = $40.80 per direct labor hour