Nexus Inc. uses a process costing system. It prepares a production cost report for each processing department. How will the managers of Nexus use these production cost reports to prepare the balance sheet at the end of an accounting period?
A)to determine the amount of current liabilities of the period
B)to determine the balance of inventory accounts
C)to determine the cost of goods sold during the period
D)to determine the amount of revenues generated during the period

Question

Quizplus · Accepted Answer

The production cost reports for each processing department will provide the managers with the cost of goods manufactured in each department. This information can then be used to calculate the total cost of goods manufactured for the accounting period. The balance sheet requires the total amount of inventory at the end of the period, which is calculated as follows: beginning inventory + cost of goods manufactured - cost of goods sold = ending inventory. Therefore, the managers can use the production cost reports to determine the balance of inventory accounts. The other options are not relevant to the preparation of the balance sheet.

Nexus Inc Uses a Process Costing System