Respuesta :
Direct labor cost = $180,000
Indirect labor cost = $70,000
Labor cost = $250,000
Solution:
Amount to be debited =
Direct labor cost * 70%
Amount to be debited = $180,000 * 70% = $126,000
The amount that should be debited to work-in-progress inventory is $126,000.
Further Explanation:
Overhead:
Overhead refers to the business expenses that are not directly associated with the production but required in the production process of the product. The overhead are incurred to support the business activities for the undisturbed flow of the operating activities. The overhead does not include the direct costs of the production such as direct material and direct labor. There are majorly two types of overhead:
- Manufacturing overhead
- Administrative overhead
Calculate the work-in-progress inventory:
The work-in-progress inventory can be calculated by multiplying the overhead rate of 70% with the total direct labor cost which is $180,000. It will be the budgeted overhead cost.
[tex]\begin{aligned}\text{Work-in-progress inventory}&=\text{Direct labor cost}\times{\text{Overhead rate}}\\&=\$180,000\times{70\%}\\&=\$126,000 \end{aligned}[/tex]
Thus, the amount that should be debited to work-in-progress inventory is $126,000.
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Answer Details:
Grade: Middle school
Chapter: Overhead allocation
Subject: Cost accounting
Keywords: cost accounting, predetermined, overhead, rate, for, neutronics, inc,direct, labor, cost, company, incurs, factory,labor, costs, during, month, direct labor,indirect labor, actual, overhead, incurred, amount, overhead, debited,work in process inventory.
