Which most accurately describes the flow of costs through the accounting system?

Question

Quizplus · Accepted Answer

The flow of costs through the accounting system typically starts with purchases, which are then added to Work in Process (WIP) to calculate the total cost of production. Factory overhead is then applied to WIP, and the resulting costs are transferred to Finished Goods. Finally, the cost of goods sold is calculated by subtracting beginning inventory from the cost of goods available for sale, and this cost is then recorded in the Cost of Sales account. Option C is the only choice that accurately describes this flow.

Which Most Accurately Describes the Flow of Costs Through the Accounting