Question

What accounts are manufacturing costs (i.e., direct materials, direct labor, mfg overhead, etc.) typically transferred to:

a. When put into production?

b. When the product is fully completed/finished?

c. When the finished product is sold?

Answer 1

a) When put to production

Work in process account. Work in process account is debited for direct material, direct labor and manfacturing overhead costs

b) When product is fully completed/finished

Finished goods inventory account. Finished goods inventory account is debited and Work in process account is credited.

c) When the finished goods is sold

Cost of goods sold Account. Cost of goods sold account is debited for cost of finished goods sold and credit is given to finished goods inventory account