Alinger Company estimates that total factory overhead costs will be $132,000 for the year. Direct labor hours are estimated to be 22,000. A. For Salinger Company, determine the pre-determined factory overhead rate using direct labor hours as the activity base.
B. During May, Salinger Company accumulated 530 hours of direct labor costs on Job 200 and 770 hours on Job 305. Determine the amount of factory overhead applied to Jobs 200 and 305 in May. C. Prepare the journal entry to apply factory overhead to both jobs in May according to the pre-determined overhead rate.
CHART OF ACCOUNTSAlmerinda CompanyGeneral Ledger
ASSETS110Cash121Accounts Receivable125Notes Receivable126Interest Receivable131Materials132Work in Process133Factory Overhead134Finished Goods141Supplies142Prepaid Insurance143Prepaid Expenses181Land191Factory192Accumul ated Depreciation-FactoryLIABILITIES210A ccounts Payable221Utilities Payable231Notes Payable236Interest Payable241Lease Payable251Wages Payable252Consultant Fees PayableEQUITY311Common Stock340Retained Earnings351Dividends390Income SummaryREVENUE410Sales610Interest RevenueEXPENSES510Cost of Goods Sold520Wages Expense531Selling Expenses532Insurance Expense533Utilities Expense534Office Supplies Expense540Administrative Expenses560Depreciation Expense-Factory590Miscellaneous Expense710Interest EA. For Almerinda Company, determine the predetermined factory overhead rate using direct labor hours as the activity base.
B. During April, Almerinda Company accumulated 20,000 hours of direct labor costs on Job 50 and 24,000 hours on Job 51. Determine the amount of factory overhead applied to Jobs 50 and 51 in April.
C. Prepare the journal entry on Apr.30 to apply factory overhead to both jobs in April according to the pre-determined overhead rate.

A. Salinger Company

1. Predetermined factory overhead rate, using direct labor hours:

= $6

2. Factory overhead applied to Jobs 200 and 305:

                               Job 200     Job 305

Overhead rate          $6              $6

Direct labor hours    530             770

Overhead applied $3,180       $4,620

3. Journal Entries:

Date      Description           Debit       Credit

May 31  Job 200               $3,180

            Job 305              $4,620

            Factory Overhead 134          $7,800

To record the overhead applied to Jobs 200 and 305 respectively.  

B. Almerinda Company

Question Completion:

Almerinda Company estimates that total factory overhead costs will be $1,750,000 for the year. Direct labor hours are estimated to be 500,000.

1. Predetermined factory overhead rate, using direct labor hours:

= $3.50

2. Determination of factory overhead applied to Job 50 and Job 51 in April:

Factory overhead applied to Jobs 200 and 305:

                                 Job 50     Job 51

Overhead rate          $3.50        $3.50

Direct labor hours    20,000      24,000

Overhead applied $70,000     $84,000

3. Journal Entries:

Date        Description           Debit       Credit

April 30  Job 50                 $70,000

            Job 51                      84,000

            Factory Overhead               $154,000

To record the overhead applied to Jobs 50 and 51 respectively.

Explanation:

a) Salinger Company

Data and Calculations:

Total factory overhead = $132,000

Direct labor hours (estimate) = 22,000

Predetermined factory overhead rate = Factory overhead divided by direct labor hours

= $132,000/22,000

= $6

b) Almerinda Company

Data and Calculations:

Total factory overhead = $1,750,000

Direct labor hours (estimate) = 500,000

Predetermined factory overhead rate = Factory overhead divided by direct labor hours

= $1,750,000/500,000

= $3.50

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