Patriots Company had the following information: $$\begin{array} { l r }
\text { Budgeted factory overhead } & \$ 85,000 \
\text { Actual factory overhead } & \$ 105,000 \
\text { Budgeted: Direct-labor costs } & \$ 100,000 \
\text { Actual: Direct-labor costs } & \$ 105,000
\end{array}$$ The journal entry to apply overhead to a job incurring $15,000 of direct-labor cost includes a _____.
A)debit to WIP Inventory for $12,750
B)credit to WIP Inventory for $15,000
C)debit to Factory Overhead Control for $12,750
D)credit to factory Overhead Control for $15,000

Question

Patriots Company had the following information: $$\begin{array} { l r } 
\text { Budgeted factory overhead } & \$ 85,000 \
\text { Actual factory overhead } & \$ 105,000 \
\text { Budgeted: Direct-labor costs } & \$ 100,000 \
\text { Actual: Direct-labor costs } & \$ 105,000
\end{array}$$ The journal entry to apply overhead to a job incurring $15,000 of direct-labor cost includes a _____.
A)debit to WIP Inventory for $12,750
B)credit to WIP Inventory for $15,000
C)debit to Factory Overhead Control for $12,750
D)credit to factory Overhead Control for $15,000

Quizplus · Accepted Answer

To apply overhead based on direct labor costs, we first need to calculate the predetermined overhead rate, which is the budgeted factory overhead divided by the budgeted direct labor costs: $85,000 / $100,000 = 0.85 or 85%. To apply overhead to a job with $15,000 of direct labor cost, we multiply the direct labor cost by the predetermined overhead rate: $15,000 * 0.85 = $12,750. This amount is debited to Work in Process (WIP) Inventory to reflect the application of overhead to the job.

Patriots Company Had the Following Information The Journal Entry to Apply Overhead to a Job Incurring