When determining costs of jobs how does a company account for indirect materials?
A) It is added to work in process as used.
B) It remains part of raw materials inventory.
C) It is transferred out of raw materials into manufacturing overhead when used.
D) It is transferred out of raw materials into work in process as used.

Question

Quizplus · Accepted Answer

Indirect materials, such as lubricants, cleaning supplies or tools that are not easily traced to a specific end product, are accounted for as part of manufacturing overhead. Thus, when these materials are used, they are transferred out of raw materials inventory and into manufacturing overhead. This overhead cost is then allocated to the end product using a predetermined overhead rate.

When Determining Costs of Jobs How Does a Company Account