Question

Minstrel Manufacturing uses a job order costing system. During one month, Minstrel purchased $198,000 of raw materials on credit; issued materials to production of $195000 of which $30.000 were indirect. Minstrel incurred a factory payroll of $150,000, of which $40,000 was indirect labor. Minstrel uses a predetermined overhead rate of 150% of direct labor cost. The journal entry to record the factory payroll is: _______.
A. Debit Work in Process Inventory $150,000; debit Factory Overhead $40,000, credit Factory Wages Payable $190000
B. Debit Work in Process Inventory $150,000, credit Cash $150.000
C. Debit Work in Process Inventory $110.000, debit Factory Overhead $40,000, credit Factory Wages
D. Debit Work in Process Inventory $150000 credit Factory Overhead $40000, credit Factory Weges Poayable $110000.
E. Debit Pwork in Process lnventory 110,000, credit Factory Overhead $40000. credit Factory wages Payable $150000.

Answer 1

Answer: C. Debit Work in Process Inventory $110.000, debit Factory Overhead $40,000, credit Factory Wages payable $150,000

Explanation:

Minstrel incurred a factory payroll of $150,000 and $40,000 was indirect.

This $40,000 indirect payroll cost will be treated as Factory overhead and will be debited.

The remaining $110,000 is direct labor costs and it will be apportioned to inventory therefore it will be debited to the Work in Process account.

The total figure of $150,000 represents the amount that the company owes its factory staff so it will be credited to factory overhead to recognize it as a liability.