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Author Question: Explain the procedure how overhead indirect costs become a part of work-in process inventory. ... (Read 106 times)

asd123

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on: Jul 5, 2018
Explain the procedure how overhead indirect costs become a part of work-in process inventory.
 
  What will be an ideal response?

Question 2

Why does the manufacturing overhead control account (debit) need to equal the manufacturing overhead allocated account (credit)?
 
  What will be an ideal response?


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ririgirl15

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Reply #1 on: Jul 5, 2018
Answer to Question 1

Answer: The overhead (indirect) costs cannot be easily traced to individual jobs. Manufacturing overhead costs, therefore, are first accumulated in a manufacturing overhead account and then allocated to individual jobs. As manufacturing overhead costs are allocated, they become part of work-in-process inventory.

Answer to Question 2

Answer: If these accounts do not equal, then overhead has either been overallocated or underallocated. Either situation means that the cost of the cost object has not been correctly estimated during the period. Evaluation of profitability will be incorrect depending on the materiality of the difference between the two accounts.


asd123

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Reply 2 on: Jul 5, 2018
Great answer, keep it coming :)

connor417

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Reply 3 on: Yesterday
Excellent

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