Hou Company Applies Factory Overhead to Its Production Departments on the Basis

question 152

Multiple Choice

Hou Company applies factory overhead to its production departments on the basis of 90% of direct labor costs. In the Assembly Department, Hou had $125,000 of direct labor cost, and in the Finishing Department, Hou 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 Goods in Process Inventory $144,000.
• B) Debit Factory Overhead $144,000; credit Goods in Process Inventory - Assembly $112,500; credit Goods in Process - Finishing $31,500.
• C) Debit Factory Overhead $144,000; credit Factory Payroll $144,000.
• D) Debit Goods in Process Inventory - Assembly $112,500; debit Goods in Process Inventory - Finishing $31,500; credit Factory Overhead $144,000.
• E) Debit Factory Payroll $144,000; credit Cash $144,000.

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Definitions:

Trade

The action of buying, selling, or exchanging goods and services between people, firms, or countries.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay.

International Trade

The exchange of goods, services, and capital among various countries and territories, crossing their international borders.

Absolute Advantage

The ability of a country, individual, or group to produce a good or service more efficiently than competitors, using fewer resources.