Dazzle, Inc. produces beads for jewelry making use. The following information summarizes production operations for June.

Direct materials used $ 90,000
Direct labor used $ 163,000
Predetermined overhead rate (based on direct labor) 158 %
Goods transferred to finished goods $ 435,000
Cost of goods sold $ 447,000
Credit sales $ 840,000

The journal entry to record June production activities for overhead allocation is:

Debit Work-in-Progress with 257,540; and credit Overhead cost also with $257,540.

Explanation:

Overhead allocated to production = Direct labor cost × Predetermined overhead rate (based on direct labor) = $163,000 × 158% = $257,540

Journal entries will look as follows:

Details                                        Dr ($)              Cr ($)  

Work-in-Progress                    257,540

Overhead cost                                                257,540

To record overhead allocated to production.              

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