The Winston Company Estimates That the Factory Overhead for the Following

question 166

Essay

The Winston Company estimates that the factory overhead for the following year will be $1,250,000.The company has decided that the basis for applying factory overhead should be machine hours,which is estimated to be 50,000 hours.The total machine hours for the year were 54,300 hours.The actual factory overhead for the year was $1,375,000.
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(a)Determine the total factory overhead amount applied.
(b)Calculate the over- or underapplied amount for the year.
(c)Prepare the journal entry to close Factory Overhead into Cost of Goods Sold.

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Definitions:

Explicit Cost

The monetary payment made by a firm to an outsider to obtain a resource.

Accounting Profits

The net earnings of a company calculated according to generally accepted accounting principles, taking into account all explicit costs but not implicit costs.

Implicit Cost

Costs that represent the loss of potential gain from using assets in an alternative option rather than in their current use.

Implicit Costs

The opportunity costs of resources that are owned by the firm and used in production, not involving direct payment of money but affecting the firm's profitability.