COST ACCOUNTING
PROCESS COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A transfer of RM24, 000 from the assembly department to the packaging department would require the entry of a:
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Debit to finished goods inventory
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Debit to WIP inventory-assembly
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Credit to raw materials inventory
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Credit to WIP inventory-assembly
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Explanation:
Detailed explanation-1: -The entry to record the cost of goods transferred from Department 1 to Department 2 in process costing system is a debit to Work in process Department 2 and a credit Work in process Department 1. If the over-applied factory overhead amount is material, it is transferred to the cost of goods sold at the end of the year.
Detailed explanation-2: -WIP refers to the raw materials, labor, and overhead costs incurred for products that are at various stages of the production process. WIP is a component of the inventory asset account on the balance sheet. These costs are subsequently transferred to the finished goods account and eventually to the cost of sales.
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