Question

Exercise 166 (Part Level Submission) The gross earnings of factory workers for Dinkel Company during the month of January are $400,000. The employer's payroll taxes for the factory payroll are $80,000. Of the total accumulated cost of factory labor, 75% is related to direct labor and 25% is attributable to indirect labor Prepare the entry to record the factory labor costs for the month of January. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

Answer 1

Ans:

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

S.No.	Account Titles and Explanation	Debit $	Credit $
(a)	Factory Labor	$480,000
	Factory Wages Payable		$400,000
	Employer Payroll Taxes Payable		$80,000
	(Entry to Record the factory cost for the month of January)

(c) The entry to assign manufacturing overhead to production assuming the predetermined overhead rate is 125% attributed to direct labor costs.

S.No.	Account Titles and Explanation	Debit $	Credit $
(c)	Work in progress inventory	$450,000
	Manufacturing overhead account		$450,000
	(Entry to Record assigning manufacturing overhead to production)

Working:

1) Direct labor cost = 75% of factory labor

  So $480,000*75% = $360,000

2) Manufacturing overhead = 125% of direct labor cost

         i.e $360,000*125%= $450,000