 In intensive, we can look at machine hours. How many machine hours does one take versus the other? So we came up with a 50% of labor and that's an arbitrary number. So that number we came up with, it's an estimate that we came up with. It has nothing to do with labor. Overhead has nothing to do with labor or payroll. That's just an estimate to make a C and see how large the jobs are. So what is happening here is we're putting money into factory overhead. We don't have any in there yet, but we will allocate as we go through this job. Those things will be allocated in here in this example. And then we're gonna allocate it from factory overhead to the working process based on an estimate. And that estimate is based on direct labor in this case. So let's see what this is gonna look like. Basically what's gonna happen is raw materials is gonna go up by us allocating all this other stuff that we think is gonna be expensed in the form of overhead, all this miscellaneous stuff. We're gonna apply that to the job when we allocate the payroll to the job, when we allocate the labor to the job because we're using the labor to help us do that allocation. So we have working process here. It has a debit balance. We need to make it go up by all this miscellaneous stuff that we're gonna estimate that is gonna be into each job. We're gonna make it go up by doing the same thing to it which in this case is another debit. So we're gonna copy the working process, gonna put that on top in cell C13, right click, paste, 123. Now how are we gonna calculate that estimate? Well, it's gonna be 50% of the direct labor. So I'm gonna just say it equals the direct labor we just did times 0.5, 50% of direct labor, enter. So we're gonna allocate 109. Again, this has nothing to do with actual labor, payroll expense in this case. All it has to do with is estimating how much of all that overhead that we are going to incur and just put into the overhead bucket, we should allocate to each individual job based on an estimate that we have made. All right, so then we're gonna have a credit for the same amount, negative of this number, and the credit is gonna go to overhead. Now notice there's nothing in overhead yet and that's okay, we're gonna allocate it to overhead as we incur the costs and then we're going to apply them to the jobs based on a predetermined estimate and rate. Okay, so we're gonna credit overhead, I'm gonna copy overhead and we are gonna paste it 123 right here. All right, so we're gonna make this smaller, back down to 80%, scroll over here a bit, we're gonna post this out, we're gonna post this journaling tree to the general ledger, here's the working process, here's the working process up here, here's the working process on the general ledger, we're gonna increase it by the third amount that it's in there, remember we did raw materials, then labor, now here's the working process, in U11 equals, we're gonna point to this 109, that's gonna bring the working process up in the general ledger as well as in the trial balance, then we're gonna post the overhead, here's the overhead here, here's the overhead here, we're gonna go to the overhead, that's like the third to last account right here on the assets, so we are in the credit side of this case, so we are gonna say equals and then in cell V25 point to the 109, that's gonna make this account go in the credit direction, so it looks like we're overdrawn now because we haven't applied anything to overhead yet, but there's the 109 credit, then we also need to back that up on the general ledger, so we're gonna scroll over to the general ledger, we have the 109 here, we need to back that up on the job cost sheet, so this is the general ledger, we're gonna back it up on the job cost sheet, so we're gonna scroll over to the job cost sheets over here we got job 14, 15 and 16, so in job 14 as of the 116 in this case, we're gonna go over to the factory overhead and we're gonna do the same calculation we did in the journal entry, but we're gonna do it by job in this case, so I'm gonna say this equals the 30,000 direct labor we applied to job 14 times point five and then so 15,000 of overhead we're gonna apply there, that's all the other stuff, the bucket of stuff, then we're gonna go over here to AP 11 equals the direct labor of 68 times point five, so we're just using the direct labor to allocate the overhead this case, we have 34, notice we're not allocating the overhead evenly, idea being that the jobs are different sizes, idea being that this job's a lot larger than this job based on the fact that there's a lot more hours being spent on that job, so then we're gonna go down to AJ 20 in the factory overhead column for job 16 equals the 120 direct labor times point five, so there we have that and if we highlight the 15,000, the 34, the 60, it should add up to the 109 that we recorded on our journal entry, if we add up all the jobs now, we now have this 760, that 760 should also be seen on the general ledger under working process right there, it should also be seen on the trial balance under working process right there, and so we are looking good, I'm gonna make it large again, and back to 100% on the task bar, scrolling all the way to the left, we can see our next transaction now, so we are on 120, 120 says we have indirect labor paid and assigned to factory overhead, all right, so we got indirect labor, so basically the question being is cash affected and in this case we're gonna say, yeah, cash is affected because we're processing payroll again, so this is processing payroll, we're gonna simplify the payroll entry and just say that we are paying cash at the time we process payroll and cash has a debit balance, we're gonna make it go down by doing the opposite thing to it, which in this case is a credit, so I'm gonna copy the cash, gonna put that on the bottom of the date, right click, paste 123, the credit will be for the 14, negative 14,000, we will then debit something for 14,000, now you might be thinking, well, we already did something where we processed payroll, why are we doing this, that was direct labor, you told me that was payroll, why is payroll down here again? Well, we could have processed payroll at the same time, but the difference between direct labor and in this case, indirect labor is that, the direct labor, we know that those are people that are working directly on the job, indirect labor are things that we can't apply directly to a job, so say we have a supervisor that's supervising a bunch of different jobs and we don't know how much time we spend on any particular job, then we would just put supervisor salary into overhead and just allocate it based on this predetermined rate that we've already allocated using, or if there are things in the factory, such as janitorial service or stuff like that, within the factory, then maintenance and all that kind of stuff of the factory then, that type of thing, we can't apply to a specific job as well necessarily, and therefore, we're gonna put it just into this.