Bard Manufacturing uses a job order cost accounting system. During one month Bard purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Bard incurred a factory payroll of $150,000, paid in cash, of which $40,000 is classified as indirect labor. Bard uses a predetermined overhead application rate of 150% of direct labor cost. The journal entry to record the allocation of the factory payroll to production is:

Question

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The allocation of the factory payroll to production involves debiting Goods in Process Inventory for the direct labor cost and the indirect labor cost, and debiting Factory Overhead for the actual indirect labor cost. This is because indirect labor is part of the manufacturing overhead and needs to be allocated to the products based on the predetermined overhead rate. Therefore, the journal entry should be:

Debit Goods in Process Inventory $110,000 (direct labor) 
Debit Factory Overhead $40,000 (indirect labor) 
Credit Factory Payroll $150,000 (cash payment for payroll)

Bard Manufacturing Uses a Job Order Cost Accounting System