ECONOMICS

Detailed explanation-1: -These costs cannot be directed to a specific product and hence, it is added in the work in progress inventory account. WIP includes overhead costs that are used at different levels of production.

Detailed explanation-2: -The journal entry to record the allocation of factory overhead is: Debit Work in Process Inventory and credit Factory Overhead.

Detailed explanation-3: -In a job-order costing system, the journal entry to record the application of overhead cost to jobs would include: a credit to the Manufacturing Overhead account.

Detailed explanation-4: -The event that causes debits to be recorded in the factory overhead accounts: Depreciation, insurance, and amortization are the events that cause credits to be deducted from factory overhead accounts.

Detailed explanation-5: -To recap, the Factory Overhead account is not a typical account. It does not represent an asset, liability, expense, or any other element of financial statements. Instead, it is a “suspense” or “clearing” account.