Question

Price Company assigns overhead based on machine hours. The Milling Department logs 2,400 machine hours and Cutting Department shows 4,000 machine hours for the period. If the overhead rate is $5 per machine hour, the entry to assign overhead will show a:
a) debit to Manufacturing Overhead for $32,000.b) credit to Manufacturing Overhead for $32,000.c) credit to Work in Process—Cutting Department for $20,000.d) debit to Work in Process for $20,000.

Answer 1

Answer:

B) credit to Manufacturing Overhead for $32,000.

Explanation:

Total manufacturing overhead = (milling department machine hours + cutting department machine hours) x overhead rate per machine hour = (2,400 + 4,000) x $5 = $32,000.

Since the manufacturing overhead expense is allocated to the asset produced, the expense is credited. Once the product is sold, the expense will become part of the cost of goods sold and they will be debited.