What Is the Correct Order in Which the Flow of Costs

question 21

Multiple Choice

What is the correct order in which the flow of costs in a manufacturing organisation occurs?
I. Transfer finished goods to stock of finished goods
II. Purchase stocks of raw materials
III. Transfer finished goods to cost of sales
IV. Charge raw materials, direct labour and factory overhead to work in process

• A) I, III, IV, II
• B) II, IV, I, III
• C) II, IV, III, I
• D) II, I, III, IV

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Definitions:

Required Production

The amount of production a company needs to meet its sales goals and inventory policies, often calculated based on forecasted sales plus target ending inventory minus beginning inventory.

Manufacturing Corporation

A manufacturing corporation is a company engaged in the industrial production of goods and products.

Produced Units

The total number of units manufactured during a specific period.

Raw Materials

Raw materials are the basic, unprocessed physical materials required for manufacturing products.