Question

Ezra Industries uses machine hours to allocate manufacturing overhead. Last month, a total of $50,000 of overhead costs were allocated: $20,000 to the Assembly Department and $30,000 to the Finishing Department. The Finishing Department is the last production department in the manufacturing process. The Finishing Department completed goods with $40,000 of associated cost last month. What are the correct journal entries to allocate manufacturing overhead and recognize the completion and transfer of goods?

Answer 1

Answer:

WIP-Assembly        20,000 debit

WIP- FInishing        30,000 debit

  Manufacturing Overehad     50,000 credit

--to record applied overhead per department--

FInished Goods       40,000 debit

       WIP- Finishing                40,000 credit

--to record transferred-out units to finished goods--

Explanation:

To allocate the manufacturing overhead we will credit the overhead account (origin of the cost) and debit the WIP of each department (destination of the cost)

For the Transferred-out we credit the WIP-finishing (origin) for the amount finished and debit the finished goods inventory (destination)