Which of the following is the correct flow of manufacturing

Which of the following is the correct flow of manufacturing costs? a. Cost of goods sold, raw materials, work in process, finished goods. b. Raw materials, work in process, finished goods, cost of goods sold. c. Raw materials, finished goods, cost of goods sold, work in process. d. Work in process, finished goods, raw materials, cost of goods sold

Solution

Raw Materials: The raw materials inventory account records the cost of materials not yet put into production.

Work in Process: The work-in-process (WIP) inventory account records the costs of products that have not yet been completed.

Finished Goods: The finished goods inventory account records the manufacturing costs of products that are completed and ready to sell.

Cost of goods sold: When completed goods are sold, their costs are transferred out of finished goods inventory into the cost of goods sold account.

The above definitions relates the flow of manufacturing costs and hence the correct flow of manufacturing cost is (B) Raw materials, Work in process, finished goods and costs of goods sold.