Penn Company uses a job order cost accounting system. In the last month, the system accumulated labor time tickets totaling $24,600 for direct labor and $4,300 for indirect labor. These costs were accumulated in Factory Payroll as they were paid. Which entry should Penn make to assign the Factory Payroll?

Question

Penn Company uses a job order cost accounting system. In the last month, the system accumulated labor time tickets totaling $24,600 for direct labor and $4,300 for indirect labor. These costs were accumulated in Factory Payroll as they were paid. Which entry should Penn make to assign the Factory Payroll?
Penn Company uses a job order cost accounting system. In the last month, the system accumulated labor time tickets totaling $24,600 for direct labor and $4,300 for indirect labor. These costs were accumulated in Factory Payroll as they were paid. Which entry should Penn make to assign the Factory Payroll? A) A above B) B above C) C above D) D above E) E above

Quizplus · Accepted Answer

In a job order cost accounting system, direct and indirect labor costs are part of the manufacturing overhead and are assigned to jobs as they are incurred. Therefore, the entry to assign the Factory Payroll would be to debit Manufacturing Overhead for the total indirect labor cost of $4,300 (option C). The direct labor cost of $24,600 would be assigned to specific jobs using the labor time tickets. Options A and B are incorrect because they do not address the indirect labor costs. Option D is incorrect because it applies the indirect labor costs to Work in Process rather than Manufacturing Overhead. Option E is incorrect because it applies both direct and indirect labor costs to Work in Process, which is not accurate for a job order cost accounting system.

Penn Company Uses a Job Order Cost Accounting System