O'Hare Company is a manufacturing firm that uses a job-order costing system to determine the costs of its products.During the current accounting period,O'Hare applied estimated manufacturing overhead costs of $1,550 to Job #132.Which of the following statements regarding this transaction is correct?
A) Work in process inventory decreases.
B) Net income decreases.
C) Manufacturing overhead decreases.
D) Total equity increases.

Question

Quizplus · Accepted Answer

When O'Hare applies the estimated manufacturing overhead costs to Job #132, the manufacturing overhead increases. This is because estimated manufacturing overhead cost is a component of manufacturing overhead. The increase in manufacturing overhead cost will be recorded as a credit to the manufacturing overhead account and a debit to the work in process inventory account. This means that the work in process inventory will increase rather than decrease. However, none of the other options are correct. Net income will not decrease because this transaction does not affect revenue or expenses. Total equity will not increase because this transaction does not involve any equity transactions.

O'Hare Company Is a Manufacturing Firm That Uses a Job-Order