In a manufacturing environment, direct labor costs initially flow
A) into the Materials Inventory account.
B) directly to Cost of Goods Sold.
C) into the Work in Process Inventory account.
D) into the Finished Goods Inventory account.

Question

Quizplus · Accepted Answer

Direct labor costs are the costs of the employees who directly contribute to the production of goods. These costs are initially recorded in the Work in Process Inventory account as the employees work on the production line. The cost is then assigned to the finished goods and eventually Cost of Goods Sold when the product is completed and sold to customers. Therefore, option C is the correct answer as direct labor costs initially flow into the Work in Process Inventory account.

In a Manufacturing Environment, Direct Labor Costs Initially Flow