When manufacturing overhead is applied to production in a job order cost system, the accounting records would reflect an increase in which of the following accounts?
A)Work in Process Inventory
B)Cost of Goods Sold
C)Finished Goods Inventory
D)Raw Materials Inventory

Question

Quizplus · Accepted Answer

When manufacturing overhead is applied to production, it is added to the Work in Process Inventory account. This is because manufacturing overhead includes indirect expenses such as rent, utilities, and depreciation that are incurred during the manufacturing process but cannot be directly traced to a specific job. As a result, they are allocated to all jobs based on some predetermined rate (such as direct labor hours or machine hours) and added to the Work in Process Inventory account for that job.

When Manufacturing Overhead Is Applied to Production in a Job