Question

-Transfer prices are ________.

A) revenues of the segment producing the transferred product

B) costs of the segment acquiring the transferred product

C) costs of the segment producing the transferred product

D) revenues of the segment producing the transferred product and costs of the segment acquiring the transferred product(correct)- found in horngren answers.

-In a process costing system, which of the following entries is prepared to transfer a finished food product from the cooking process to the packaging process?

A) Debit Work-In-Process Inventory—Cooking, Credit Work-In-Process Inventory—Packaging

B) Debit Finished Goods Inventory—Credit Work-In-Process Inventory—Packaging

C) Debit Work-In-Process Inventory—Packaging, Credit Work-In-Process Inventory—Cooking

D) Debit Work-In-Process Inventory—Packaging, Credit Finished Goods Inventory

-In job-order costing, the journal entry to record the application of factory overhead costs to jobs includes a Debit to ________.

A) Factory Department Overhead Control

B) Factory Department Overhead Applied

C) Finished Goods Inventory

D) Work-In-Process Inventory

Answer 1

Transfer prices are - D. "revenues of the segment producing the transferred product and costs of the segment acquiring the transferred product."

Consider the expample of a company which is in business of manufacturing shirts. The company has two departments - Dept A converts raw cotton into cloth pieces, Dept. B converts cloth pieces into shirts.

Here if Dept B choses to directly purchase cloth pieces from out side and manufacture shirts, then the purchase price paid for procuring the cloth pieces from outside would be cost for Dept. B ( cost of raw material).

Similary if Dept A choses to sell its finished good ( i.e. cloth pieces) to outsiders then it can geneate revenue from such sales.

Hence Transfer prices are revenues of the segment producing the transferred product and costs of the segment acquiring the transferred product.

-In a process costing system, which of the following entries is prepared to transfer a finished food product from the cooking process to the packaging process?

D) Debit Work-In-Process Inventory—Packaging, Credit Finished Goods Inventory

-In job-order costing, the journal entry to record the application of factory overhead costs to jobs includes a Debit to ________.

A) Factory Department Overhad Control