In: Accounting
Minstrel Manufacturing uses a job order costing system. During one month Minstrel purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, of which $40,000 was indirect labor. Minstrel uses a predetermined overhead rate of 150% of direct labor cost. The journal entry to record the application of factory overhead to production is:
Journal : Debit Work in Process Inventory $165,000; credit Factory Overhead $165,000.
Workings:
Direct labor = Total labor cost - Indirect labor = 150,000 - 40,000 =110,000
Applied factory overhead = 110,000 * 150% = 165,000
Journal entry
Account Titles | Debit | Credit |
Work in Process Inventory | 165000 | |
Factory Overhead | 165000 |