In: Accounting
Meadows Manufacturing has $10,000 in payroll for its factory workers that must be added the cost of its product. How would Meadows record the direct labor cost?
A : a debit to Wages Payable and a credit to Work in Process Inventory
B : a debit to Work in Process Inventory and a credit to Manufacturing Overhead
C : a debit to Manufacturing Overhead and a credit to Factory Labor
D : a debit to Work in Process Inventory and a credit to Factory Labor
Correct Answer --- D : a debit to Work in Process Inventory and a credit to Factory Labor
Explanation
All the cost of Production such Direct material, Direct labor and Overheads are transferred to work in progress account by Debiting work in progress account and crediting respective head of costs such as Material cost, labor cost or Overheads. Opening and closing WIP is adjusted with current year’s cost to calculate cost of Production.
In the above case $10000 payroll would be added to cost by making the given below entry in books
Work in Progress Inventory $10000
Factory Labor $10000
(Direct labor cost Recorded)