Juarez Builders incurred $285,000 of labor costs for construction jobs completed during the month of August, of which $212,000 was direct and $73,000 was indirect supervisory costs.
- The correct journal entry to record the $73,000 indirect labor for the month is:

Question

Quizplus · Accepted Answer

Indirect labor costs are part of manufacturing overhead costs and are not directly traceable to a specific product. Therefore, the correct journal entry is to debit Factory Overhead (an overhead account) and credit Factory Wages Payable (a liability account). Option D correctly reflects this entry. Option A is incorrect because Supervisor Wage Expense is a direct cost and not an overhead cost. Option B is incorrect because it debits Factory Wages Payable, which is a liability account, and not an expense account. Option C is incorrect because it debits Supervisor Wage Expense, which is a direct cost and not an overhead cost. Option E is incorrect because it debits Factory Wage Expense, which is incorrect since the expense is indirect labor and is part of the overhead cost.

Juarez Builders Incurred $285,000 of Labor Costs for Construction Jobs