If the predetermined overhead allocation rate is 85% of direct labor cost and the Polishing Department's direct labor cost for the reporting period is $20,000,the following entry would be made to record the allocation of overhead to the products processed in this department:
$\begin{array}{llr}
\text { Factory Overhead } &17,000\
\text { Goods in Process Inventory, Painting Dept } &&17,000\
\end{array}$

Question

If the predetermined overhead allocation rate is 85% of direct labor cost and the Polishing Department's direct labor cost for the reporting period is $20,000,the following entry would be made to record the allocation of overhead to the products processed in this department:
 $\begin{array}{llr}
  \text { Factory Overhead } &17,000\
 \text { Goods in Process Inventory, Painting Dept } &&17,000\
\end{array}$

Quizplus · Accepted Answer

The correct entry should debit Goods in Process Inventory, Polishing Dept, not Painting Dept, for $17,000, which is 85% of the $20,000 direct labor cost.