When factory wages payable costs for labor are allocated in a job cost accounting system:

When Factory Wages Payable costs for labor are allocated in a
job cost accounting system: a. Work in Process Inventory and Factory Overhead are debited
and Factory Wages Payable is credited. b. Cost of Goods Manufactured is debited and Direct Labor is
credited. c. Direct Labor and Indirect Labor are debited and Factory Wages
Payable is credited. d. Work in Process Inventory is debited and Factory Wages
Payable is credited. e. Factory Wages Payable is debited and Work in Process
Inventory is credited.

General guidance

Concepts and reason
Job order costing: It is a method of cost accounting, in which cost is collected and accumulated for each job, work order, or project separately. Especially the job order costing is followed in organizations where customized goods are produced. The costs of goods manufactured incurred in each job, or project, work order are determined in the Cost of Good Manufactured Schedule.
Cost of Goods Manufactured Schedule: The cost of goods manufactured is calculated in a statement. For the calculation of cost of goods manufactured, the beginning and ending work in process, direct materials, direct labor, and manufacturing overhead are considered.
Direct materials cost: Direct materials cost is the cost of prime raw materials which are directly related or identified with the goods produced. For example, the cost of plastic component is identified as direct materials cost in the production of plastic bottle.
Direct labor cost: The costs that are related to the labor employed in manufacturing process are known as direct labor costs. The direct labor costs includes not only wages of employees, but also worker’s compensation, life and medical insurance, payroll taxes, training costs, and pension contributions.

Fundamentals

Factory overhead costs: The costs, which do not relate directly with the manufacturing of products, are referred to as manufacturing overhead costs or factory overhead costs or indirect costs. Some examples are insurance cost related to factory operations, depreciation incurred on factory equipment, electricity of the equipment, rent of the plant, and compensation of plant managers.
Journal entry: The record of business transactions entered in a chronological order in the journal is referred to as journal entry.
Rules of debit and credit:
§Debit: The term used to refer to the left side of an account is known as debit. Debit an increase in asset and expense accounts; and decrease in liability and revenue accounts.
§Credit: The term used to refer to the right side of an account is known as credit. Credit the decrease in asset and expense accounts; and increase in liability and revenue accounts.

Step-by-step

Step 1 of 2

Review of debit and credit rules for a journal entry:
§When labor costs are allocated for a specific job, the labor costs are debited to inventory accounts. Labor costs are expenses. Increase in assets and expenses are debited.
§Since the factory wages are allocated, but not paid, they are reported as payables. The payables are liabilities. Increase in liabilities is credited.

In job order costing, the allocated labor costs increases expenses and payables. Therefore, increase in expenses is debited and increase in liabilities is credited.

Use the review given in Step 1 to find the correct option.

Step 2 of 2

In the given requirement, labor costs are allocated, and not paid. This creates an increase in expense and increase in payables. In job order costing, the expenses are added to inventory. Therefore, work-in-process inventory and factory overheads are debited. The increase in factory payables are credited.
Therefore, correct option is (a).

Work-in-Process Inventory and Factory Overhead are debited and Factory Wages Payable are credited

Since labor costs are not paid, the allocated expenses create liability for factory wages (factory wages payables). Since labor costs would be added to inventory, the assets (inventory) are increased. Factory overhead costs are expenses, the expenses (factory wages) are increased.

Answer

Work-in-Process Inventory and Factory Overhead are debited and Factory Wages Payable are credited

Answer only

Work-in-Process Inventory and Factory Overhead are debited and Factory Wages Payable are credited

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