In a job order costing system, during production, to what account are the costs of direct materials, direct labor, and applied overhead assigned?

• A. Finished Goods Inventory
• B. Cost of Goods Sold
• C. Raw Materials Inventory
• D. Work in Process Inventory

Answer: (D)

Verified step by step guidance

1. Understand the concept of a job order costing system: This system is used to assign costs to specific jobs or batches of production. It tracks direct materials, direct labor, and overhead costs for each job.
2. Recognize the role of Work in Process (WIP) Inventory: This account is used to accumulate costs for jobs that are still in production but not yet completed. It represents the value of partially completed goods.
3. Identify the types of costs assigned to WIP Inventory: Direct materials, direct labor, and applied overhead are all costs incurred during production and are assigned to the Work in Process Inventory account.
4. Understand the flow of costs: Costs are first assigned to Work in Process Inventory during production. Once the job is completed, the costs are transferred to Finished Goods Inventory. When the goods are sold, the costs move to Cost of Goods Sold.
5. Relate the accounts to the production process: Raw Materials Inventory is reduced when direct materials are used, and those costs are transferred to Work in Process Inventory. Similarly, direct labor and applied overhead are added to Work in Process Inventory as production progresses.