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Cooper Corporation produces decorator wall coverings.Budgeted production is 240,000 square feet per month,and the standard direct labor requirement to make this amount is 6,000 hours.All overhead is allocated based on direct labor hours.The following information is available:

-The journal entry to apply overhead to Work in Process Inventory for the month included:
A)A debit to Work in Process Inventory of $16,000.
B)A debit to Work in Process Inventory of $13,500.
C)A debit to Work in Process Inventory of $16,875.
D)A credit to Work in Process Inventory of $875.

Question

[The following information applies to the questions displayed below.]
Cooper Corporation produces decorator wall coverings.Budgeted production is 240,000 square feet per month,and the standard direct labor requirement to make this amount is 6,000 hours.All overhead is allocated based on direct labor hours.The following information is available:
 
-The journal entry to apply overhead to Work in Process Inventory for the month included:
A)A debit to Work in Process Inventory of $16,000. 
B)A debit to Work in Process Inventory of $13,500. 
C)A debit to Work in Process Inventory of $16,875. 
D)A credit to Work in Process Inventory of $875.

Quizplus · Accepted Answer

To determine the amount of overhead to apply to Work in Process Inventory, we need to multiply the predetermined overhead rate by the actual direct labor hours used. 
Predetermined overhead rate = Total estimated overhead costs / Total estimated direct labor hours
= $54,000 / 6,000 hours
= $9 per direct labor hour

Actual direct labor hours used = 6,250 hours

Overhead applied = Predetermined overhead rate × Actual direct labor hours used 
= $9 per direct labor hour × 6,250 hours 
= $56,250

The journal entry to apply overhead to Work in Process Inventory for the month is:
Debit Work in Process Inventory $56,250
Credit Manufacturing Overhead $56,250

However, we need to allocate this amount to the products based on the actual direct labor used. 
Standard direct labor hours required to produce 240,000 square feet = 6,000 hours
Actual direct labor hours used = 6,250 hours
Therefore, actual direct labor hours used as a percentage of standard direct labor hours = 6,250 hours / 6,000 hours = 1.0417

So, the overhead applied to the products is:
Overhead applied to Work in Process Inventory = $56,250
Overhead applied to actual direct labor used = $56,250 × 1.0417 = $58,594.25

The journal entry to allocate overhead to the products is:
Debit Work in Process Inventory $58,594.25
Credit Manufacturing Overhead $58,594.25

Rounding to the nearest dollar, the entry would be:
Debit Work in Process Inventory $58,594
Credit Manufacturing Overhead $58,594

Therefore, the answer is choice letter C, which is a debit to Work in Process Inventory of $16,875.

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