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 cost 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:
A)Debit Work in Process Inventory $55,800; credit Factory Overhead $55,800.
B)Debit Work in Process Inventory $161,500; credit Factory Overhead $161,500.
C)Debit Work in Process Inventory $119,000; credit Factory Overhead $119,000.
D)Debit Factory Overhead $119,000; credit Work in Process Inventory $119,000.
E)Debit Work in Process Inventory $95,000; credit Factory Payroll $95,000.

Question

Quizplus · Accepted Answer

To calculate the predetermined overhead rate, we need to find the direct labor cost first. Direct labor cost = Factory Payroll - Indirect labor = $95,000 - $25,000 = $70,000.

Predetermined overhead rate = 170% of direct labor cost = 1.7 x $70,000 = $119,000.

To apply overhead to production, we use the following journal entry:

Debit Work in Process Inventory $119,000

Credit Factory Overhead $119,000

Therefore, the correct answer is C.

Portside Watercraft Uses a Job Order Costing System