Minstrel Manufacturing uses a job order costing system. During one month Minstrel purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, of which $40,000 was indirect labor. Minstrel uses a predetermined overhead rate of 150% of direct labor cost.
-The journal entry to record the application of factory overhead to production is:
A) Debit Factory Overhead $165,000; credit Work in Process Inventory $165,000.
B) Debit Factory Payroll $150,000; credit Work in Process Inventory $150,000.
C) Debit Work in Process Inventory $225,000; credit Factory Overhead $225,000.
D) Debit Work in Process Inventory $165,000; credit Factory Payroll $165,000.
E) Debit Work in Process Inventory $165,000; credit Factory Overhead $165,000.

Question

Minstrel Manufacturing uses a job order costing system. During one month Minstrel purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, of which $40,000 was indirect labor. Minstrel uses a predetermined overhead rate of 150% of direct labor cost. 
-The journal entry to record the application of factory overhead to production is:
A) Debit Factory Overhead $165,000; credit Work in Process Inventory $165,000.
B) Debit Factory Payroll $150,000; credit Work in Process Inventory $150,000.
C) Debit Work in Process Inventory $225,000; credit Factory Overhead $225,000.
D) Debit Work in Process Inventory $165,000; credit Factory Payroll $165,000.
E) Debit Work in Process Inventory $165,000; credit Factory Overhead $165,000.

Quizplus · Accepted Answer

The application of factory overhead to production is recorded by debiting the Work in Process Inventory account and crediting the Factory Overhead account. The amount of overhead applied is calculated by multiplying the predetermined overhead rate (150%) by the direct labor cost ($110,000). Therefore, the journal entry to record the application of factory overhead to production is:

Debit Work in Process Inventory $165,000
Credit Factory Overhead $165,000

Minstrel Manufacturing Uses a Job Order Costing System