The gross earnings of the factory workers for Darlinda Company during the month
of January are $80,000. The employer's payroll taxes for the factory payroll are $8,000. The fringe benefits to be paid by the employer on this payroll are $4,000. Of the total accumulated cost of factory labor, 85% is related to direct labor and 15% is attributable to indirect labor.
(a) Prepare the entry to record the factory labor costs for the month of January.
(b) Prepare the entry to assign factory labor to production.
This problem might best be solved by first determining how much of the cost is to go to direct labor and how much to indirect labor. Then determine what accounts these will go into.
So for the direct labor, 85% x $80,000 is the first part. The fringe benefits also should be allocated; 85% x $4,000 then goes to direct labor. And last, the taxes. Since the taxes are a cost of the labor, they should be allocated to direct labor and indirect labor cost, though I can't find anything in my text referring to this. ...
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