Question

Juarez Builders incurred $285,000 of labor costs for construction jobs completed during the month of August, of which $212,000 was direct and $73,000 was indirect supervisory costs. The correct journal entry to record the direct labor for the month is:

Answer 1

Answer:

                                                             Dr.            Cr.  

Work in progess                              139,000

Salaries and wages payable account                139,000

Explanation:

Direct Labor are charges to work in progress account and a payble is created as a result.

Total Labor cost = $212,000

Indirect cost = $73,000

Direct labor cost = $212,000 - 73,000

Direct labor cost = $139,000

Answer 2

Answer:

Dr Work in process inventory 212, 000

      Cr Factory wages payable 212, 000

Explanation:

Direct labor costs are directly associated with the production process and vary proportionally to total production output. Indirect labor costs are not directly associated with the production process and do not vary according to the production output. Indirect labor costs are part of manufacturing overhead costs.

The complete journal entry for recording labor (both direct and indirect) is as follows:

August 31, wages and salaries.

Dr Work in process inventory 212,000

Dr Factory overhead 73,000

     Cr Wages payable 285,000