CAF-5 · Chapter 5 · Question 5 of 10
A factory incurs a total payroll cost of Rs. 96,000. Out of this, Rs. 90,000 relates to direct labour working directly on the products, and Rs. 6,000 relates to indirect labour (e.g., factory supervisors). What is the correct journal entry to allocate these costs into the production flow?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Debit: Work in Process Control 90,000, Debit: Production Overheads Control 6,000 / Credit: Salaries & Wages Control 96,000
Explanation
Direct labour costs (Rs. 90,000) are charged directly to production (WIP Control). Indirect labour costs (Rs. 6,000) cannot be traced to specific units and are therefore charged to the Production Overheads Control account. The total is credited out of the Salaries & Wages Control account.
More Cost Flow in Production MCQs
- Q7If raw materials are issued from the store but are to be used as general factory supplies (indirect materials) rather than for a specific…
- Q8When factory overheads are applied (absorbed) into the cost of production based on a predetermined overhead absorption rate, what is the…
- Q9When the production of a batch of goods is fully completed on the factory floor, the total cost of these completed units must be…
- Q10In an interlocking accounting system, the cost ledger does not maintain cash or bank accounts. Therefore, whenever a financial transaction…
- Q1According to the study text, what is the fundamental definition of "Accounting"?