The Journal Entry to Record the Actual (Not Applied) Overhead

question 7

Multiple Choice

The journal entry to record the actual (not applied) overhead costs incurred includes:

• A) a debit to Manufacturing Overhead.
• B) a debit to Work in Process Inventory.
• C) a debit to Finished Goods Inventory.
• D) a debit to Cost of Goods SolD.
• When actual overhead costs are incurred, debit Manufacturing Overhead account. The credit would be to Cash, Payables, Prepaid Assets, or Accumulated Depreciation. (In contrast, when applying manufacturing overhead costs based on a predetermined rate, credit the Manufacturing Overhead account.)

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Definitions:

Production Constraint

A limitation or bottleneck in the manufacturing process that reduces the efficiency or capacity of production.

Defective Units

Products produced by a manufacturing process that do not meet the quality standards set by the company and cannot be sold to customers.

Production Process

A series of actions, operations, or methods employed in the manufacture or production of goods or services.

Machine Hours

The cumulative duration during which machines are utilized in the production process, often a factor in costing models.