Dentlinger Company uses a job-order cost system and had the following data available for 20X2.

-The journal entry to record the application of the factory overhead would include a
A) debit to Factory Department Overhead Control for $286,000.
B) debit to WIP Inventory for $286,000.
C) credit to Factory Department Overhead Control for $292,000.
D) credit to WIP Inventory for $292,000.

Question

Dentlinger Company uses a job-order cost system and had the following data available for 20X2.
 
-The journal entry to record the application of the factory overhead would include a
A) debit to Factory Department Overhead Control for $286,000. 
B) debit to WIP Inventory for $286,000. 
C) credit to Factory Department Overhead Control for $292,000. 
D) credit to WIP Inventory for $292,000.

Quizplus · Accepted Answer

In a job-order cost system, the factory overhead is applied to the Work in Process Inventory through the use of a predetermined overhead rate. The formula for applying overhead is: predetermined overhead rate x actual amount of the allocation base used for each job. In this case, the predetermined overhead rate is calculated as $292,000 ÷ $1,460,000 = 20%. The application of overhead for the year is calculated as follows: $1,510,000 x 20% = $302,000. Since the actual overhead incurred for the year is $286,000, the journal entry to apply overhead would be a debit to Work in Process Inventory for $286,000.

Dentlinger Company Uses a Job-Order Cost System and Had the Following