ECONOMICS

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COST ACCOUNTING

COST BOOK KEEPING

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
In a cost bookkeeping system what would be the entry for the absorption of production overhead?Debit Credit1.) Cost Ledger Control Account-Production Overhead Account2.) Production Overhead Account-Work-in-Progress Account 3.) Work-in-Progress Account-Cost Ledger Control Account 4.) Work-in-Progress Account-Production Overhead Account
A
1
B
2
C
3
D
4
Explanation: 

Detailed explanation-1: -Overhead rate = (factory overhead / direct wages) x 100.

Detailed explanation-2: -Absorption costing allocates fixed overhead costs to a product whether or not it was sold in the period. This type of costing method means that more cost is included in the ending inventory, which is carried over into the next period as an asset on the balance sheet.

Detailed explanation-3: -Journal entries are used to record and report the financial information relating to the transactions. The example that follows illustrates how the journal entries reflect the process costing system by recording the flow of goods and costs through the process costing environment.

Detailed explanation-4: -(8) Selling and Distribution Overhead Control Account-This account is debited with selling and distribution overheads incurred and credited with the selling and distribution overheads recovered. The difference between overheads incurred and recovered is transferred usually to Overhead Adjustment Account.

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