Question

LO 4.6Why is the manufacturing overhead account debited as expenses are recognized and then credited when overhead is applied?

Answer 1

Step-by-step explanation:

Manufacturing overhead records all the expenses like salaries payable which come under indirect labor. Manufacturing overhead includes all those indirect costs which are related to the factory-like - factory rent, factory repairs, depreciation on factory equipment, property taxes

For recognized expense, the journal entry would be

Factory overhead A.c Dr

To Expenses A/c

(Being expense recognized)

Since the cost is actually incurred so this above entry should be made

And, the journal entry for applied overhead is shown below

Work in progress inventory A/c Dr XXXXX

To Factory overhead A/c XXXXX

(Being overhead applied is recorded)

Since applied overhead is based on predetermined overhead rate so we credit the factory overhead and debit the work in progress inventory