Question

If the predetermined overhead allocation rate is 245% of direct labor cost, and the Baking Department's direct labor cost for the reporting period is $10,000, the following entry would be made to record the allocation of overhead to the products processed in this department:

Work in Process Inventory, Baking Dept

24,500
Factory Overhead 24,500
True

False

Answer 1

Answer:

True

Explanation:

The  given entry  is correct as it shows a debit to Work in Process Inventory, Baking Dept  24,500 and credit to  Factory Overhead 24,500

The applied factory overhead account is closed to the actual factory overhead control account at the end of the accounting period by debiting the applied factory overhead and crediting factory overhead control account.

It is common practice  to use an applied factory overhead account because it keeps applied costs and actual costs in separate accounts.Some companies do not use applied factory overhead account and post credit directly to factory overhead control account.

Work in Process Inventory, Baking Dept   24,500  Dr

Factory Overhead 24,500 Cr

This entry eliminates the transfer of applied expenses to actual expenses