Question

Rules of financial reporting (GAAP) require (4pts) that direct manufacturing costs and a fair share of indirect manufacturing costs be assigned to products. that only producing department costs be assigned to products. that only direct manufacturing costs be assigned to products. that only indirect manufacturing costs be assigned to products.

Answer 1

Rules of financial reporting (GAAP) require Answer a) that direct manufacturing costs and a fair share of indirect manufacturing costs are assigned to products. Explanation Direct manufacturing cost is that cost which is assigned to the product directly and indirect cost is that which cannot be assigned to product directly. According to GAAP it is very necessary to show the direct manufacturing costs to the work in process inventory and a fair share of indirect manufacturing costs to the manufacturing overheads and sum of direct and indirect cost must be transferred to finished goods inventory

Which joint cost allocation method is described by the following statement? Joint cost is prorated to the products on the basis of each products share of units Answer a) Physical unit's method Explanation Under physical units method joint costs are allocated among joint products on the basis of each product share of units or physical quantity such as weight, volume or length of each product relative to total production. All joint products must have some basic unit of measurement, otherwise it is not possible to allocate the joint cost to them