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The following information is available for ADT Company, which produces special-order security products and uses a job order costing system. Overhead is applied using a predetermined overhead rate of 55% of direct labor cost.

Inventories Beginning of period End of Period
Raw materials $ 29,000 $ 41,000
Work in process 9,900 19,000
Finished goods 55,000 34,000
Cost incurred for the period
Raw materials purchases $ 173,000
Factory payroll 150,000
Factory overhead (actual)
Indirect materials used 9,000
Indirect labor used 34,500
Other overhead costs 111,500
Exercise 15-14 (Algo) Recording direct and indirect labor LO P2, P3
Direct labor used (recorded as factory wages payable).
Indirect labor used (recorded as factory wages payable).
Prepare journal entries for the above transactions for the period.

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Answer:

To record the direct and indirect labor transactions for ADT Company, we need to consider the direct and indirect labor costs incurred during the period. Let's prepare the journal entries:

Direct Labor Used (recorded as Factory Wages Payable):

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Work in Process Inventory       xx

  Factory Wages Payable        xx

Explanation: This entry records the direct labor cost incurred and adds it to the Work in Process Inventory.

Indirect Labor Used (recorded as Factory Wages Payable):

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Factory Overhead                xx

  Factory Wages Payable        xx

Explanation: This entry records the indirect labor cost incurred and adds it to the Factory Overhead account.

Now, let's calculate the direct labor cost and indirect labor cost.

Direct Labor Cost:

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Direct Labor Cost = Factory Payroll - Indirect Labor Used

Direct Labor Cost = $150,000 - $34,500

Direct Labor Cost = $115,500

Now, we can use the calculated direct labor cost to record the direct labor used entry.

Recording the direct labor used entry (using the calculated direct labor cost):

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Work in Process Inventory       $115,500

  Factory Wages Payable        $115,500

Recording the indirect labor used entry:

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Factory Overhead                $34,500

  Factory Wages Payable        $34,500

These journal entries capture the direct and indirect labor costs for the period in the job order costing system.

Step-by-step explanation:

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