Question

"During the period, labor costs incurred on account amounted to $175,000, including $150,000 for production orders and $25,000 for general factory use. In addition, factory overhead charged to production was $32,000. The entry to record the direct labor costs is"

Answer 1

These are the options for the question:

a.Wages Payable 175,000

Work in Process 175,000

b.Work in Process 175,000

Wages Payable 175,000

c.Work in Process 150,000

Wages Payable 150,000

d.Wages Payable 150,000

Work in Process 150,000

And this is the correct answer:

c.Work in Process 150,000

Wages Payable 150,000

Step-by-step explanation:

Work in Process in an asset account that values the amount of direct labor performed in the completion of a product. In the question, it is specified that while total labor costs amounted to $175,000, only $150,000 of those costs where used to make the production orders, while $25,000 was used in general factory work (not direct labor).

The counter-account is wages payable, a liability account because it represents labor costs that have yet to be paid (principle of accrual accounting).