Chapter 15, Problem 6E

To determine

Overhead:

Overheads are the cost and the expenses a company incurs of the production of a particular goods or services which are not directly related to the production. It does not include labor and direct material.

Direct Material Cost:

Direct material cost is the cost that a company incurs while manufacturing a certain product or service. It includes all the cost and expenses that are directly associated with the production such as raw materials.

Direct Labor Cost:

Direct labor cost is the cost that a company incurs in giving wages to the people that are directly associated with the production work.

Journal Entries:

Journal entries are the entries that are made in the books of accounts to record every transaction that happens in the business in the chronological order.

Accounting rules for journal entries:

• To Increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.
• To Decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

To prepare: Journal entries.