The factory overhead applied to the product is $5,400
Let understand that Factory Overhead means the <em>total cost</em> that is used in operating all the production segment (i.e depreciation of equipment, salary, wages, electricity) of a manufacturing company and its does not include the costs of direct labor & materials.
- <em>Factory Labor Incurred equals $8,000 (including $6,000 direct and $2,000 indirect</em>
<em>- Manufacturing Overhead is applied to the product based on 90% of direct labor dollars</em>
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- Therefore, the Factory overhead applied will equals Direct factory labor incurred * 90% Overhead applied
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<em>Factory overhead applied = $6,000 * 90%</em>
<em>Factory overhead applied = $5,400</em>
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In conclusion, the factory overhead applied to the product is $5,400
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Answer
The answer and procedures of the exercise are attached in the following archives.
Explanation
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1. Insurance expense for 6 months = 12,960 x 6/36
= $2,160
Prepaid insurance on December 31, 2021 = 12,960 - 2,160
= $10,800
2.Interest expense for 2 months = 220,000 x 12% x 2/12
= $4,400
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