Yamada Company applies factory overhead to its production departments on the bas

Question

Yamada Company applies factory overhead to its production departments on the basis of 90% of direct labor costs. In the Assembly Department,Yamada had $125,000 of direct labor cost, and in the Finishing Department, Yamada had $35,000 of direct labor cost. The entry to apply overhead to these production departments is:

A.

Debit Factory Overhead - Assembly $112,500 ; Debit Factory Overhead - Finishing $31,500 ; Credit Work in Process Inventory $144,000

B.

Debit Factory Overhead $144,000 ; Credit Work in Process Inventory - Assembly $112,500 ; Credit Work in Process - Finishing $31,500

C.

Debit Factory Overhead $144,000 ; Credit Factory Payroll $144,000

D.

Debit Work in Process Inventory - Assembly $112,500 ; Debit Work in Process Inventory - Finishing $31,500 ; Credit Factory Overhead $144,000

E.

Debit Factory Payroll $144,000 ; Credit Cash $144,000

Explanation / Answer

D.

Debit Work in Process Inventory - Assembly $112,500 ; Debit Work in Process Inventory - Finishing $31,500 ; Credit Factory Overhead $144,000

Assembly = $125000 * 0.90 = 112,500
Finishing = $35000 * 0.90 = 31,500

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