Which of the following is the correct flow of costs in a manufacturing operation?
A)Raw materials to finished goods
B)Raw materials to finished goods to work-in-process
C)Raw materials to work-in-process to finished goods
D)Direct materials to work-in-process to finished goods.

Question

Quizplus · Accepted Answer

The correct flow of costs in a manufacturing operation is from raw materials to work-in-progress (WIP) to finished goods. Raw materials are converted into WIP, which includes direct labor and manufacturing overhead costs, and then finished goods are produced from the WIP. Direct materials are a subset of raw materials and are included in the flow from raw materials to WIP. Therefore, option C, raw materials to WIP to finished goods, is the correct flow of costs in a manufacturing operation.

Which of the Following Is the Correct Flow of Costs