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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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The costs transferred from a prior process to a subsequent process are

  1. a. treated as another type of materials cost for the receiving department.
  2. b. referred to as transferred-in costs (for the receiving department).
  3. c. referred to as the cost of goods transferred out (for the transferring department).
  4. d. All of these.
  5. e. None of these.

To determine

Identify the treatment of costs transferred from a prior process to a subsequent process.

Explanation

Transfer-in Cost:

A cost transferred from the previous process to the next process is known as transfer cost. In other words transfer cost is a cost which acts as a raw material cost in the next process.

d.

The cost transferred from prior to subsequent process is used as a transferred-in cost for the next process. It is treated as cost of goods transferred-out for transferring department. It is also treated as material cost for receiving department. Therefore option d. is correct.

a.

Cost transferred from prior to subsequent process is treated as material cost in the department which receives it...

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