Desco Electronics, Inc. manufactures car radios. The direct material cost assigned to car radios Desco started during the period but did not fully complete would be found in the ending balance:
A. raw materials inventory.
B. work in process inventory.
C. finished goods inventory.
D. both raw materials inventory and work in process inventory.
The correct answer and explanation is :
The correct answer is:
B. Work in Process Inventory.
Explanation:
Desco Electronics, Inc. manufactures car radios, which means its production process involves several stages: raw material acquisition, manufacturing (work in process), and final product completion (finished goods). The direct material cost assigned to car radios that have been started but not fully completed at the end of the period would be recorded under work in process (WIP) inventory.
Breakdown of Inventory Categories:
- Raw Materials Inventory – This includes materials that have been purchased but not yet used in production. Since the question specifies that the car radios have already entered production, their cost cannot be classified under raw materials inventory.
- Work in Process Inventory (WIP) – This category includes all costs associated with partially completed goods. Since Desco’s car radios have been started but not completed, their direct material cost is recorded here. The WIP inventory reflects materials, labor, and overhead costs for unfinished products.
- Finished Goods Inventory – This includes fully manufactured car radios ready for sale. Since the radios in question are not yet completed, they do not belong in this category.
- Both Raw Materials Inventory and Work in Process Inventory – This is incorrect because direct materials used in production move out of raw materials inventory and into WIP inventory. They cannot be recorded in both at the same time.
Thus, the correct classification for the direct material cost of incomplete car radios is work in process inventory (B).
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