The cost of a department's transferred-in goods is the cost of:

Question

Quizplus · Accepted Answer

The cost of transferred-in goods is the cost of goods transferred out as computed in the prior department. This is because the transferred-in goods are the goods that have been completed in the previous department and are now being transferred to the current department for further processing. The cost of these goods includes not only the direct materials, labor, and overhead incurred in the previous department but also any indirect costs allocated to those goods. Therefore, option B is the correct choice.

Options A and C are incorrect because they do not capture the full cost of transferred-in goods. Option A only includes the direct costs incurred in the previous department, while option C only includes the direct materials and conversion costs in the current department.

Option D is also incorrect because there is a cost associated with transferred-in goods and it needs to be accounted for properly in order to accurately determine the cost of goods sold.

The Cost of a Department's Transferred-In Goods Is the Cost