Yamada Company applies factory overhead to its production departments on the basis of 90% of direct labor costs.In the Assembly Department,Yamada had $125,000 of direct labor cost,and in the Finishing Department,Yamada had $35,000 of direct labor cost.The entry to apply overhead to these production departments is:
A)Debit Factory Overhead-Assembly $112,500;debit Factory Overhead-Finishing $31,500;credit Work in Process Inventory $144,000.
B)Debit Factory Overhead $144,000;credit Work in Process Inventory-Assembly $112,500;credit Work in Process-Finishing $31,500.
C)Debit Factory Overhead $144,000;credit Factory Payroll $144,000.
D)Debit Work in Process Inventory-Assembly $112,500;debit Work in Process Inventory-Finishing $31,500;credit Factory Overhead $144,000.
E)Debit Factory Payroll $144,000;credit Cash $144,000.

Question

Quizplus · Accepted Answer

The overhead applied is 90% of direct labor costs: $112,500 for Assembly (90% of $125,000) and $31,500 for Finishing (90% of $35,000). The correct entry debits Work in Process Inventory for both departments and credits Factory Overhead.

Yamada Company Applies Factory Overhead to Its Production Departments on the Basis