A company that uses a job order costing system would make the following entry to record the flow of direct materials into production:
A) debit Work in Process Inventory, credit Raw Materials Inventory.
B) debit Work in Process Inventory, credit Cost of Goods Sold.
C) debit Work in Process Inventory, credit Factory Overhead.
D) debit Finished Goods Inventory, credit Raw Materials Inventory.
E) debit Factory Overhead, credit Raw Materials Inventory.

Question

Quizplus · Accepted Answer

Job order costing involves allocating costs to specific jobs or orders, and the first step in this process is recording the flow of direct materials into production. This is done by debiting the Work in Process Inventory account (where the costs of labor and overhead will be added later) and crediting the Raw Materials Inventory account (where the cost of materials was previously recorded). Option A shows this entry. Option B is incorrect because it credits Cost of Goods Sold, which would only occur when the finished product is sold. Option C debits Factory Overhead, which is not appropriate for recording the flow of materials. Option D debits Finished Goods Inventory, which does not yet exist until the job is complete. Option E debits Factory Overhead for the same reason as Option C.

A Company That Uses a Job Order Costing System Would