Question

Dazzle, Inc. produces beads for jewelry making use. The following information summarizes production operations for June. The journal entry to record June production activities for overhead allocation is:

Direct materials used	$	94,000
Direct labor used	$	167,000
Predetermined overhead rate (based on direct labor)		154	%
Goods transferred to finished goods	$	439,000
Cost of goods sold	$	451,000
Credit sales	$	880,000

Multiple Choice

• Debit Work in Process Inventory $167,000; credit Factory Wages $167,000.

• Debit Work in Process Inventory $257,180; credit Factory Overhead $257,180.

• Debit Work in Process Inventory $167,000; credit Factory Overhead $167,000.

• Debit Work in Process Inventory $167,000; credit Cash $167,000.

• Debit Factory Overhead $257,180; credit Cash $257,180.

Answer 1

Direct labor used = $167,000

Predetermined overhead rate = 154% of direct labor cost

Factory overhead applied = Direct labor used x Predetermined overhead rate

= 167,000 x 154%

= $257,180

Due to factory overhead applied, Work in process will increase and factory overhead will decrease by $257,180.

The following journal entry will be made to allocate factory overhead:

Debit Work in Process Inventory $257,180; credit Factory Overhead $257,180.

Second option is correct.