A product requires processing in two departments, Department 22 and then Department 23, before it is completed.What happens to costs transferred out of Department 22?
A)They are debited to Finished Goods Inventory.
B)They are transferred to Cost of Goods Sold.
C)They are debited to Work in Process-Department 23.
D)They are credited to Manufacturing Overhead.

Question

Quizplus · Accepted Answer

Costs transferred out of Department 22 are still part of the Work in Process inventory, but they are now assigned to Department 23. Therefore, they should be debited to Work in Process-Department 23. Option A is incorrect as Finished Goods Inventory is the final inventory account that is credited, not debited. Option B is incorrect as Cost of Goods Sold is the expense account that is debited only after the finished product is sold. Option D is incorrect as Manufacturing Overhead is a separate account for indirect costs incurred in the manufacturing process, and is not affected by the transfer of costs between departments.

A Product Requires Processing in Two Departments, Department 22 and Then