When manufacturing overhead costs are applied to jobs using a predetermined overhead rate, which account is impacted?

The application of manufacturing overhead costs to jobs using a predetermined overhead rate fundamentally impacts the Work in Process (WIP) Account. This account records all costs associated with products that are still in the manufacturing process. When overhead is applied, it increases the total costs accumulated in the WIP Account, reflecting not just the direct material and direct labor costs, but also the manufacturing overhead.

This process is essential in job costing systems, where costs are tracked by individual jobs. The predetermined overhead rate is established at the beginning of the accounting period based on estimated overhead costs and activity levels. As costs are incurred and applied to WIP, they accumulate until the products are completed and subsequently transferred to the Finished Goods Account.

Ultimately, the correct account impacted by the application of manufacturing overhead is the WIP Account, as it captures all costs associated with jobs that are still in progress and awaiting completion.