Question

The gross earnings of the factory workers for Larkin Company during the month of January are $82,000. The employer’s payroll taxes for the factory payroll are $9,000. The fringe benefits to be paid by the employer on this payroll are $6,900. Of the total accumulated cost of factory labor, 82% is related to direct labor and 18% is attributable to indirect labor.

(a) Prepare the entry to record the factory labor costs for the month of January.

(b) Prepare the entry to assign factory labor to production.

Answer 1

A	Factory labor	97,900
	Factory wages payable		82,000
	Employer payroll taxes payable		9,000
	Employer fringe benefits payable		6,900
B	Work in Process Inventory (97,900*82%)	80,278
	Manufacturing overhead (97,900*18%)	17,622
	Factory labor		97,900