In a process costing system, when manufacturing overhead costs are applied to the cost of production, they are debited to:
A) the Finished Goods Inventory account.
B) the Cost of Goods Sold account.
C) the Goods in Process Inventory account.
D) the Manufacturing Overhead account.
E) the Raw Materials Inventory account.

Question

Quizplus · Accepted Answer

In a process costing system, manufacturing overhead costs are applied to the cost of production by debiting the Goods in Process Inventory account, which represents the inventory that is in the manufacturing process but not yet completed. Once the product is completed, the costs are transferred to Finished Goods Inventory and then ultimately to Cost of Goods Sold when the product is sold. Therefore, option C is the best choice.

In a Process Costing System, When Manufacturing Overhead Costs Are