During the period, labor costs incurred on account amounted to $250,000 including $200,000 for production orders and $50,000 for general factory use. In addition, factory overhead applied to production was $23,000. From the following, select the entry to record the factory overhead applied to production.
Answer
Work in Process 50,000
Factory Overhead 50,000
Factory Overhead 23,000
Work in Process 23,000
Work in Process 23,000
Factory Overhead 23,000
Factory Overhead 50,000
Accounts Payable 50,000
Factory Overhead 23,000
Work in process 23,000
The correct entry to record the factory overhead applied to production is:
Factory Overhead 23,000
Work in Process 23,000
To get this answer, we need to understand that factory overhead is the indirect costs incurred in the production process, such as rent, utilities, and depreciation. It cannot be directly assigned to a specific product or job but is allocated to production based on a predetermined overhead rate. This predetermined rate is typically calculated based on an estimated level of activity, such as direct labor hours or machine hours.
In this case, the factory overhead applied to production is $23,000. This means that $23,000 of the total factory overhead cost was allocated to the production orders.
To record this in the accounting system, we debit the Factory Overhead account and credit the Work in Process account because factory overhead is being applied to the production process. The debit to Factory Overhead increases the balance in that account, while the credit to Work in Process increases the value of work in progress.