Which of the following best describes the journal entry to apply factory overhead to production?

• A. Debit Work in Process; Credit Factory Overhead
• B. Debit Factory Overhead; Credit Raw Materials
• C. Debit Factory Overhead; Credit Work in Process
• D. Debit Finished Goods; Credit Factory Overhead

Answer: (A)

Verified step by step guidance

1. Understand the concept of factory overhead application: Factory overhead refers to indirect costs incurred during production, such as utilities, depreciation, and maintenance. These costs are applied to production to allocate them to the Work in Process (WIP) account.
2. Recognize the role of the Work in Process account: The WIP account tracks the costs of partially completed goods during production. When factory overhead is applied, it increases the WIP account to reflect the indirect costs allocated to production.
3. Understand the Factory Overhead account: The Factory Overhead account is used to accumulate indirect costs. When these costs are applied to production, the Factory Overhead account is credited to reduce its balance, as the costs are transferred to the WIP account.
4. Determine the correct journal entry: To apply factory overhead to production, you debit the Work in Process account (to increase it) and credit the Factory Overhead account (to decrease it). This reflects the allocation of indirect costs to production.
5. Review the options provided: The correct journal entry is 'Debit Work in Process; Credit Factory Overhead,' as this accurately applies factory overhead to production.