For a manufacturing company, direct material costs may be included in ________.
A) only the direct materials inventory account
B) only in the merchandise inventory account reflecting the inventory on hand
C) only in both work-in-process inventory and finished goods inventory
D) direct materials inventory, work-in-process inventory, and finished goods inventory accounts

Question

Quizplus · Accepted Answer

Direct material costs are included in the direct materials inventory account when the materials are purchased, in the work-in-process inventory account when they are being used to manufacture products, and in the finished goods inventory account when the products are completed and ready for sale. Therefore, the direct material costs are included in all three inventory accounts: direct materials inventory, work-in-process inventory, and finished goods inventory.

For a Manufacturing Company, Direct Material Costs May Be Included