Question

If there is a debit balance in the Factory Payroll account at the end of the accounting period, it represents: A. an amount because applied payroll was greater than actual payroll. B. an amount because actual payroll was greater than applied payroll C. labor costs which have not yet been distributed D. an amount which should be charged to Cost of Goods sold

Answer 1

Correct answer is C. labor costs which have not yet been distributed

The factory payroll account is debited when the actual labor cost is incurred by crediting the wages payable or cash account. The amount incurred is then distributed as direct labor and indirect labor. the distributed amount is credited to factory payroll account and debited to work in process inventory and factory overhead account for direct labor and indirect labor respectively. The undistributed labor cost is thus shown as debit balance in the factory payroll account.