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

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

Answer: (D)

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 products being manufactured.
2. Recognize the accounts involved: 'Work in Process' represents the costs of products that are partially completed, while 'Factory Overhead' is the account used to track indirect production costs before they are allocated.
3. Determine the journal entry structure: When factory overhead is applied to production, the 'Work in Process' account is debited to increase the cost of partially completed goods, and the 'Factory Overhead' account is credited to reduce the balance of overhead costs that have been allocated.
4. Analyze the options provided: The correct journal entry is 'Debit Work in Process; Credit Factory Overhead,' as this reflects the allocation of overhead costs to production.
5. Review the reasoning: This journal entry ensures that indirect costs are properly assigned to the products being manufactured, aligning with the principles of cost accounting and accurate financial reporting.