Ezra Industries uses machine hours to allocate manufacturing overhead. Last month, a total of $50,000 of overhead costs were allocated: $20,000 to the Assembly Department and $30,000 to the Finishing Department. The Finishing Department is the last production department in the manufacturing process. The Finishing Department completed goods with $40,000 of associated cost last month. What are the correct journal entries to allocate manufacturing overhead and recognize the completion and transfer of goods?

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Ezra Industries uses machine hours to allocate manufacturing overhead. Last month, a total of $50,000 of overhead costs were allocated: $20,000 to the Assembly Department and $30,000 to the Finishing Department. The Finishing Department is the last production department in the manufacturing process. The Finishing Department completed goods with $40,000 of associated cost last month. What are the correct journal entries to allocate manufacturing overhead and recognize the completion and transfer of goods?

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Yair Richmond · Answer 1

WIP-Assembly 20,000 debit

WIP - FInishing 30,000 debit

Manufacturing Overehad 50,000 credit

--to record applied overhead per department--

FInished Goods 40,000 debit

WIP - Finishing 40,000 credit

--to record transferred-out units to finished goods--

Explanation:

To allocate the manufacturing overhead we will credit the overhead account (origin of the cost) and debit the WIP of each department (destination of the cost)

For the Transferred-out we credit the WIP-finishing (origin) for the amount finished and debit the finished goods inventory (destination)