Yamada Company applies factory overhead to its production departments on the basis of 90% of direct labor costs.In the Assembly Department,Yamada had $125,000 of direct labor cost,and in the Finishing Department,Yamada had $35,000 of direct labor cost.The entry to apply overhead to these production departments is:
A)Debit Factory Overhead-Assembly $112,500; debit Factory Overhead-Finishing $31,500; credit Work in Process Inventory $144,000.
B)Debit Factory Overhead $144,000; credit Work in Process Inventory-Assembly $112,500; credit Work in Process-Finishing $31,500.
C)Debit Factory Overhead $144,000; credit Factory Wages Payable $144,000.
D)Debit Work in Process Inventory-Assembly $112,500; debit Work in Process Inventory-Finishing $31,500; credit Factory Overhead $144,000.
E)Debit Factory Wages Payable $144,000; credit Cash $144,000.

Question

Quizplus · Accepted Answer

The correct calculation for applying overhead is 90% of direct labor costs for each department: Assembly ($125,000 * 90% = $112,500) and Finishing ($35,000 * 90% = $31,500). The total overhead applied is the sum of these amounts, which is debited to Work in Process Inventory for each department and credited to Factory Overhead.

Yamada Company Applies Factory Overhead to Its Production Departments on the Basis