A journal entry that debits work in process and credits manufacturing overhead is recording the application of manufacturing overhead cost.
What do you mean by manufacturing overhead cost?
- Manufacturing overhead costs (MOH) are the sum of all indirect costs incurred in the production of a product. It is added to the price of the final product along with direct material costs and direct labor costs.
- Typically, manufacturing overhead costs include depreciation of equipment, wages and salaries paid to factory personnel, and electricity used to operate the equipment.
- According to GAAP (Generally Accepted Accounting Principles), manufacturing overhead should be included in the cost of finished goods in inventory and work-in-progress inventory on the manufacturer's balance sheet and on the cost of goods income statement.
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