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16 June, 18:19

During February, Irving Corporation incurred $65,000 of actual Manufacturing Overhead costs. During the same period, the Manufacturing Overhead applied to Work in Process was $60,000. The journal entry to record the incurrence of the actual Manufacturing Overhead costs would include a:

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  1. 16 June, 21:10
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    debit to Manufacturing Overhead of $65,000.

    Explanation:

    The production process involves a flow of goods though different stages. First raw material is purchased and the raw material is moved to work in process. The work in process is then moved to finished goods, and finally sold and cost if goods sold is incurred.

    During the WIP when overhead is applied it will involve a debit of $65,000 for the total overhead from manufacturing overhead.

    The credit leg will be $60,000 to WIP and the rest to some other stage of the production process.
  2. 16 June, 21:29
    0
    The question is divided into parts as below with their applicable multiple choices:

    The journal entry to record the incurrence of the actual Manufacturing Overhead costs would include a: A. debit to Manufacturing Overhead of $65,000 B. credit to Manufacturing Overhead of $65,000 C. credit to Work in Process of $60,000 D. debit to Work in Process of $60,000

    The correct option here is A, debit to Manufacturing Overhead of $65,000

    The journal entry to record the application of Manufacturing Overhead to Work in Process would include a: A. debit to Work in Process of $65,000 B. credit to Work in Process of $65,000 C. credit to Manufacturing Overhead of $60,000 D. debit to Manufacturing Overhead of $60,000

    The correct option is C, credit to Manufacturing Overhead of $60,000

    Explanation:

    One must bear in mind that before the computation of overhead the overhead cost of $60,000 has already being applied to work-in-process, however the actual overhead incurred tend to be $5,000 higher than applied ($65000-$60,000), which should accounted for the manufacturing overhead, hence the following entries were passed:

    Dr Manufacturing overhead $65,000

    Cr Manufacturing overhead $60,000

    Effectively, the excess of the debit over credit is the extra overhead to be charged.
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