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 Work 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 them to the Work in Process Inventory account. This is because the manufacturing overhead costs are incurred while the product is in the manufacturing process and are therefore added to the work in process. Once the product is completed, the manufacturing overhead costs are then transferred to the Finished Goods Inventory account and ultimately to Cost of Goods Sold when the product is sold. Therefore, options A and B are incorrect. Option D is also incorrect as it is the account where the actual manufacturing overhead costs are initially recorded before being allocated to the production process. Option E is incorrect as it pertains to the cost of raw materials, not manufacturing overhead costs.

In a Process Costing System,when Manufacturing Overhead Costs Are Applied