Question

Dream House Builders, Inc. applies overhead by linking it to direct labor. At the start of the current period, management predicts total direct labor costs of $100,000 and total overhead costs of $20,000. On January 31, the direct labor for this job equals $2,700. Complete the following journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Answer 1

Dr Work in Process Inventory 540

Cr Credit - Factory Overhead 540

Step-by-step explanation:

Preparation of journal entry

Dr Work in Process Inventory 540

Cr Credit - Factory Overhead 540

Calculation for the Overhead assigned to this job

First step is to calculate the Predetermined overhead rate

Predetermined overhead rate =$20,000 ÷$100,000

Predetermined overhead rate =20%

Now let calculate Overhead assigned to this job

Overhead assigned to this job = $2,700 ×0.20 Overhead assigned to this job= $540

Therefore the journal entry is :

Dr Work in Process Inventory 540

Cr Credit - Factory Overhead 540