Question

During the period, labor costs incurred on account amounted to $175,000, including $150,000 for production orders and $25,000 for general factory use. In addition, factory overhead charged to production was $32,000. The entry to record the direct labor costs is:
a. Work in Process 175,000 Wages Payable 175,000
b. Wages Payable 175,000 Work in Process 175,000
c. Wages Payable 150,000 Work in Process 150,000
d. Work in Process 150,000 Wages Payable 150,000

Answer 1

Answer:

d. Work in Process      150,000 DEBIT

          Wages Payable                150,000 CREDIT

Explanation:

The direct labor will the wages accrued for production orders. The general factory use will be part of the actual factory overhead. It should not be considered as direct labor. It is indirec tlabor, a component of manufactring overhead.

We debit work in process as it represent an assets, these units will be finished, sell and collected; completing the conversion cycle of assets.

While the wages are credited as thy represent an obligation to pay (liabilties)