Chapter 2, Problem 4BE

(a)

To determine

Predetermined factory overhead rate

Normally, factory overhead costs are applied or allocated to cost of job based on predetermined factory overhead rate. The formula to calculate the predetermined factory overhead rate is as follows:

$\text{Predetermined factory overhead rate = }\frac{\text{Estimated total factory overhead costs}}{\text{Estimated activity rate}}$

the predetermined factory overhead rate of Company B.

(b)

To determine

Applied factory overhead

The company applies factory overhead using predetermined factory overhead rate. The factory overhead applied is recorded in each job sheet which consists of direct labor hour and predetermined overhead rate.

the amount of factory overhead applied to Jobs 200 and 305 in May.

(c)

To determine

To record: Journal entry the factory overhead applied in the books of Company B.