Yamada Company applies factory overhead to its production departments on the basis of 90% of direct labor costs.In the Assembly Department,Yamada had $125,000 of direct labor cost,and in the Finishing Department,Yamada had $35,000 of direct labor cost.The entry to apply overhead to these production departments is:

A) Debit Factory Overhead-Assembly $112,500; debit Factory Overhead-Finishing $31,500; credit Work in Process Inventory $144,000.
B) Debit Factory Overhead $144,000; credit Work in Process Inventory-Assembly $112,500; credit Work in Process-Finishing $31,500.
C) Debit Factory Overhead $144,000; credit Factory Wages Payable $144,000.
D) Debit Work in Process Inventory-Assembly $112,500; debit Work in Process Inventory-Finishing $31,500; credit Factory Overhead $144,000.
E) Debit Factory Wages Payable $144,000; credit Cash $144,000.

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Manpreet Singh · Accepted Answer

Final Answer : D, Explanation :  The correct calculation for applying overhead is 90% of direct labor costs for each department: Assembly ($125,000 * 90% = $112,500) and Finishing ($35,000 * 90% = $31,500). The total overhead applied is the sum of these amounts, which is debited to Work in Process Inventory for each department and credited to Factory Overhead.

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