Atlantic Manufacturing Company uses standard costing methodology in their journal entries and accounts. Standards for manufacturing overhead are as follows:
$$\begin{array} { l l }
\text { Variable overhead: } & \$ 30 \text { per direct labor hour } \
\text { Fixed overhead: } & \$ 10 \text { per direct labor hour }
\end{array}$$
Actual overhead incurred (variable and fixed): $45,600
Other data provided:
Standards for direct labor are as follows:
Hours per unit 0.5 Price per hour $18.00
Actual direct labor for the month: 1,200 hours for a total cost of $24,000
Planned production for the month: 3,000 units
The journal entry to allocate overhead (both variable and fixed) to production would be to:

Question

Atlantic Manufacturing Company uses standard costing methodology in their journal entries and accounts. Standards for manufacturing overhead are as follows:
$$\begin{array} { l l } 
\text { Variable overhead: } & \$ 30 \text { per direct labor hour } \
\text { Fixed overhead: } & \$ 10 \text { per direct labor hour }
\end{array}$$
Actual overhead incurred (variable and fixed): $45,600
Other data provided:
Standards for direct labor are as follows:
Hours per unit 0.5 Price per hour $18.00
Actual direct labor for the month: 1,200 hours for a total cost of $24,000
Planned production for the month: 3,000 units
The journal entry to allocate overhead (both variable and fixed) to production would be to:

Quizplus · Accepted Answer

The correct journal entry to allocate overhead to production involves debiting Work in Process (WIP) and crediting Manufacturing Overhead with the standard cost, not the actual cost incurred. The standard cost for overhead (both variable and fixed) is calculated based on the planned production and the standard rates per direct labor hour. With 3,000 units planned and 0.5 hours per unit, the total direct labor hours are 1,500. At $40 per direct labor hour ($30 variable + $10 fixed), the standard overhead cost is $60,000 ($40 * 1,500 hours).

Atlantic Manufacturing Company Uses Standard Costing Methodology in Their Journal