Question

Portside Watercraft uses a job order costing system. During one month Portside purchased $153,000 of raw materials on credit; issued materials to production of $164,000 of which $24,000 were indirect. Portside incurred a factory payroll of $95,000, of which $25,000 was indirect labor. Portside uses a predetermined overhead rate of 170% of direct labor cost. The journal entry to record the application of factory overhead to production is:

Answer 1

Answer:

Payroll = $95,000,

Indirect labor   = $25000

Direct labor paid = $95000 - $25000 = $70000

∵ predetermined overhead application rate is 170 % of direct labor cost

Overhead applied to work in process = 70000 × 170 %

= $119,000

Journal entry:

Debit  ⇒ Work in process = $1190000

Credit ⇒ Factory Overheads = $119000