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12 August, 05:43

Dream House Builders, Inc. applies overhead by linking it to direct labor. At the start of the current period, management predicts total direct labor costs of $100,000 and total overhead costs of $20,000. On January 31, the direct labor for this job equals $2,700.

Prepare journal entries to record these events.

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  1. 12 August, 07:22
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    Goods in Process Inventory - - Job ... $540 Dr Factory Overhead can be calculated as $540 Cr

    Explanation:

    Factory Overhead = (Total Overhead Costs / Total Direct Labor Costs) x Direct Labor

    Factory Overhead = ($20,000 / $100,000) x $2,700

    Factory Overhead = 0.2 x $2,700

    Factory Overhead = $540

    On January 31, the journal entry to apply overhead is

    Goods in Process Inventory - - Job ... $540 Dr

    Factory Overhead can be calculated as $540 Cr.
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