When you complete an item assembly journal entry to assemble new inventory -

Question

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When completing an item assembly journal entry, additional setup costs are typically allocated across the assembled items, which can be done equally or based on another rational basis, depending on the accounting policies of the organization. This process ensures that the full cost of assembly, including both direct costs and additional setup or indirect costs, is accurately reflected in the cost of the finished goods. Choices A, C, and D are incorrect as they misrepresent the effects of an assembly journal entry on inventory management and accounting.

When You Complete an Item Assembly Journal Entry to Assemble