Question

Diaz and Associates incurred the following costs in completing a tax return for a large company. Diaz applies overhead at 50% of direct labor cost. LaborHours Used Hourly Rate Partner 5 $450 Senior manager 13 160 Staff accountants 100 70 1. Prepare journal entries to record direct labor and the overhead applied.

Answer 1

Date Accounts Receivable Debit Credit

XX-XX-XXXX Work in Process $11,330

Wages Payable $11,330

Date Accounts Receivable Debit Credit

XX-XX-XXXX Work in Process $5,665

Manufacturing overhead $5,665

Working

Total labor cost:

= Partner cost + Senior manager cost + Staff accountants

= (5 * 450) + (13 * 160) + (100 * 70)

= $11,330

Overhead is 50% of direct labor cost:

= 11,330 * 50%

= $5,665