Gia Machine Shop uses a predetermined overhead allocation rate of $63.20 per direct labor hour. In January, Gia completed Job A23 which utilized 15 direct labor hours. Which of the following correctly describes the journal entry to allocate overhead to the job?

Question

Quizplus · Accepted Answer

The predetermined overhead allocation rate is used to allocate overhead costs to jobs based on the number of direct labor hours used. Therefore, the journal entry to allocate overhead to Job A23 would be to debit Work-in-Process Inventory $948 (15 hours x $63.20 per hour) and credit Manufacturing Overhead $948. Option A is incorrect because it debits Finished Goods Inventory instead of Work-in-Process Inventory. Option B is incorrect because it debits Manufacturing Overhead instead of Work-in-Process Inventory. Option D is incorrect because it debits Cost of Goods Sold instead of Work-in-Process Inventory.

Gia Machine Shop Uses a Predetermined Overhead Allocation Rate of $63.20