In a job-order costing system, manufacturing overhead applied is recorded as a debit to which of the following accounts?

• A. Cost of Goods Sold
• B. Finished Goods
• C. Work in Process
• D. Manufacturing Overhead

Answer: (C)

Verified step by step guidance

1. Understand the concept of job-order costing: In a job-order costing system, costs are assigned to specific jobs or batches of production. Manufacturing overhead is applied to jobs based on a predetermined overhead rate.
2. Recognize the role of manufacturing overhead: Manufacturing overhead includes indirect costs such as factory rent, utilities, and depreciation. These costs are applied to jobs during production.
3. Identify the account to which manufacturing overhead is applied: When manufacturing overhead is applied, it is recorded as a debit to the Work in Process account. This reflects the fact that overhead costs are part of the total production costs for jobs still in progress.
4. Understand the credit side of the transaction: The Manufacturing Overhead account is credited when overhead is applied, reducing the balance of overhead costs that have been incurred but not yet allocated to jobs.
5. Review the flow of costs: Costs in the Work in Process account (including direct materials, direct labor, and applied overhead) are eventually transferred to Finished Goods once production is complete, and then to Cost of Goods Sold when the goods are sold.