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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Entries for direct labor and factory overhead

Townsend Industries Inc. manufactures recreational vehicles. Townsend uses a job order cost system. The time tickets from November jobs are summarized as follows:

Job 201 $6,240
Job 202 7,000
Job 203 5,210
Job 204 6,750
Factory supervision 4,000

Factory overhead is applied to jobs on the basis of a predetermined overhead rate of S18 per direct labor hour. The direct labor rate is $40 per hour.

a. Journalize the entry to record the factory labor costs.

b. Journalize the entry to apply factory overhead to production for November.

(a)

To determine

Direct labor cost

The employees working on particular job use time ticket to record the work done by them with respect to a particular job. The summary of time tickets is used for calculating direct labor cost for a particular job.

Factory overhead

It includes all manufacturing costs except direct material cost and direct labor cost. Factory overhead cost includes all costs like indirect materials, indirect labor, factory power and factory depreciation.

To record: the journal entry for factory labor cost of T Industries.

Explanation

The journal entry is prepared as follows:

Date Account titles and Explanation Debit
($)
Credit
($)
    Work in processTable (2) 25,200  
  Factory overhead 4,000  
  Wages Payable   29,200
  (Record factory labor cost)    

(b)

To determine

Applied factory overhead

The company applies factory overhead using predetermined factory overhead rate. The factory overhead applied is recorded in each job sheet which consists of direct labor hour and predetermined overhead rate.

To record: Journal entry the factory overhead applied in the books of T Industries.

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