Final answer:
When manufacturing overhead is applied, a debit is made to Work in Process and a credit to Manufacturing Overhead, reflecting the allocation of indirect manufacturing costs to goods that are in production.
Step-by-step explanation:
When manufacturing overhead is applied to Work in Process, the accounting entry includes a debit to Work in Process and a credit to Manufacturing Overhead. This transaction reflects the allocation of indirect manufacturing costs to the goods that are currently being produced. The Work in Process account represents the accumulation of direct materials, direct labor, and applied manufacturing overhead that has yet to be completed.
The overhead applied is typically calculated based on a predetermined overhead rate which is estimated before the start of the accounting period. This rate is then used to apply overhead to products based on a relevant activity base such as machine hours or labor hours. Once actual costs are known, any difference between the applied overhead and actual overhead will need to be adjusted for in order to accurately reflect the cost of goods sold.