Question

Allen Industries manufactures cell phone cases for phone manufacturers by using multiple departments to develop products for their various models of phones. This month Allen assigned $3,400 in direct labor costs to the Forming Department and $2,560 in direct labor to the Assembly Department. $800 in indirect labor costs were accumulated in Manufacturing Overhead. What would be the journal entry to record these transactions

Answer 1

WIP Forming 3,400 debit

WIP Assembly 2,560 debit

Factory Overhead 800 debit

wages payable 6,760

to record assignment of labor to cost

Step-by-step explanation:

The labor cost of each department will increase the deparment work in process. Once the producion or jobs are finished it will be capitalized through finished goods inventory.

The indirect labor cost are actual factory overhead. Later on, it will be compared with the applied overhead and checked for over or underapplication of the overhead.

On the credit side, in the case the wages are not paid, we will use wages payable.

If the wages has been paid, we will use cash.