14. MC.16-093 Reynolds Manufacturers Inc. has estimated total factory overhead c

Question

14. MC.16-093 Reynolds Manufacturers Inc. has estimated total factory overhead costs of $95,000 and expected direct labor hours of 9,500 for the current fiscal year. If job number 117 incurs 2,300 direct labor hours, Work in Process will be debited and Factory Overhead will be credited for a. $2,300 b. $23,000 C. $21,850 d. $95,000 15. MC.16-100 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 175,000 175,000 150,000 175,000 150,000 Wages Payable 150,000 b. Wages Payable C. Wages Payable d. Work in Process Work in Process 175,000 Work in Process 150,000 Wages Payable

Explanation / Answer

1 Estimated manufacturing Overhead cost $95,000 Expected Direct Labour Hours 9500 Predetermined Manufacturing Overhead Rate = Estimated manufacturing Overhead cost Expected Direct Labour Hours =95000 = $10 Per Hour 9500 Actual Direct Labour Hour 2300 So, Factory Overhead would be $23,000 (2300 X $ 10 Per Hour ) Therefore, Factory Overhead will be credited for $23000. Option (B) 2 In the case of Job costing, Direct wages pertaining to the Production order (Specific Job) should be recorded as direct labour cost. Also, In job order costing system, any labor charges that are not directly traceable to a particular job are known as indirect labor cost. Therefore, in the given question, $150000 was exclusively incurred for Production Orders, which should be defined under "Direct Labour cost". For direct labor, we have to debited work in process and credited Wages Payable. Thus, Journal entry of Direct labour cost as follows. Debit Credit Work in Process                  200,000 150000    Wages Payable                                       200,000 150000 Option (D)

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