Companies that use a process-cost accounting system would:

establish a separate Finished-Goods Inventory account for each manufacturing department.

charge goods produced with actual overhead amounts rather than applied overhead amounts.

pass completed production directly to Cost of Goods Sold.

eliminate the need for the Finished-Goods Inventory account.

establish a separate Work-in-Process Inventory account for each manufacturing department.

Question

Business

Dakota Jensen

6 January, 15:10

Companies that use a process-cost accounting system would:

establish a separate Finished-Goods Inventory account for each manufacturing department.

charge goods produced with actual overhead amounts rather than applied overhead amounts.

pass completed production directly to Cost of Goods Sold.

eliminate the need for the Finished-Goods Inventory account.

establish a separate Work-in-Process Inventory account for each manufacturing department.

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Answers (1)

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Ricardo Oconnell · Answer 1

The correct answer is letter "E": establish a separate Work-in-Process Inventory account for each manufacturing department.

Explanation:

Process-cost accounting is an approach used to assign costs of processes per department on direct materials, direct labor, and factory overhead. In such cases, conversion and prime costs are allocated to each department's manufacturing process to value the inventory of final goods.

Thus, the Work-In-Progress (WIP) Inventory is also assigned according to the manufacturing processes of each department.