Question

Horton Company uses a normal costing system. Factory overhead is allocated on the basis of labor hours. At the beginning of the year, management estimated that the company would incur $1,050,000 of manufacturing overhead costs and use 70,000 labor hours. The company recorded the following events during the month of March.

(a) Purchased $800,000 of materials on account.

b) Used $600,000 of materials in production, of which $80,000 were used as indirect materials.

(c) Incurred $250,000 of direct labor costs and $50,000 of indirect labor costs.

(d) Recorded depreciation on equipment for the month, $22,000.

(e) Paid $8,000 cash for utilities and other miscellaneous items for the manufacturing plant.

(f) Used 10,000 labor hours during March.

The debit to Work-in-Process Inventory account for materials is: Group of answer choices

$80,000

$520,000

$600,000

$800,000

The credit to Manufacturing Overhead Allocated account is: Group of answer choices

$150,000

$140,000

$180,000

$160,000

Answer 1

1)
Account Titles and Explanation	Debit	Credit
Work in process inventory   - Balancing Fig.	$ 520,000
Manufacturing Overheads	$ 80,000
Raw material inventory		$ 600,000
The debit to Work-in-Process Inventory account for materials is $ 520,000
Option (b) is Correct -$ 520,000
2)
Overhead Rate = Estimated manufacturing overhead costs / Labor hours    = $ 1,050,000 / 70,000    =   $ 15 per hour
Account Titles and Explanation	Debit	Credit
Work in process Inventory	$ 150,000
Manufacturing Overheads                 ( 10,000 Hours x $ 15 per Hour )		$ 150,000
The credit to Manufacturing Overhead Allocated account     = $ 150,000
Option (a ) is Correct -$ 150,000