E2-1 The gross earnings of the factory workers for Vargas Company

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E2-1 The gross earnings of the factory workers for Vargas Company during the month of
January are $66,000. The employer’s payroll taxes for the factory payroll are $8,000. The
fringe benefi ts to be paid by the employer on this payroll are $6,000. Of the total accumulated
cost of factory labor, 85% is related to direct labor and 15% is attributable to indirect labor.

Instructions

(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.