Harna, Inc.uses a job-order cost system.During the year the company decreased Manufacturing Overhead by $300,000.Which of the following most likely should be recorded at the same time?

Question

Quizplus · Accepted Answer

When Manufacturing Overhead is decreased, it means that the actual overhead costs incurred during the year were less than the estimated overhead costs assigned to jobs. This would result in a decrease to the balance in the Manufacturing Overhead account. To record this decrease, a debit would be made to a control account in the general ledger such as Manufacturing Overhead Control, and a credit would be made to the actual overhead cost accounts (such as utilities, rent, etc.) However, since this is a job-order cost system, the decrease in manufacturing overhead should also be allocated to the specific jobs that were worked on during the year. This is done through a credit to Manufacturing Overhead Allocated and a debit to Work in Process Inventory. Therefore, the correct answer is A - a debit to Work in Process Inventory.