Cavy Company estimates that the factory overhead for the following year will be $1,470,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 40,000 hours. The machine hours for the month of April for all of the jobs were 4,780. Required:
Prepare the journal entry to apply factory overhead.

Answer and Explanation:

The journal entry to record the factory overhead is given below:

Predetermined Overhead rate is

= Estimated overhead ÷ Estimated machine hours

= $1,470,000 ÷ 40,000

= $36.75 per mh

Now journal entry is  

Work in Process $175,665  

     To Factory Overhead $175,665   (4780 × 36.75)

(Being the factory overhead applied is recorded)

Here work in process is debited as it increased the assets and credited the factory overhead as it decreased the expense

answer; planning;

answernet income for 2017 will be greater if the inventory quantity declines;