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Quizzes > Business & Finance > Business & Industry

How Well Do You Understand Direct Materials Flow in Accounting?

Dive into the cost systems quiz and master manufacturing cost flow!

Difficulty: Moderate
2-5mins
Learning OutcomesCheat Sheet
paper art ledger coins arrows on sky blue background for accounting 202 quiz on direct materials requisition and cost flow

Use this quiz to practice when direct materials are requisitioned and how they flow directly into Work in Process within manufacturing. Check gaps before your Accounting 202 exam as you track requisitions, post to WIP, and tell job order from process costing. When you're done, review direct labor and overhead to round out your cost flow skills.

When direct materials are requisitioned from the storeroom, the cost is debited to which account?
Manufacturing Overhead
Finished Goods Inventory
Raw Materials Inventory
Work in Process Inventory
Under a job order or process costing system, requisitioning direct materials results in a debit to Work in Process Inventory and a credit to Raw Materials Inventory. This entry reflects that materials have entered production. .
Which document authorizes the transfer of materials from the storeroom to manufacturing?
Materials requisition slip
Inventory count sheet
Purchase order
Receiving report
A materials requisition slip serves as the authorization for issuing materials to production. It specifies type, quantity, and cost of materials transferred. .
When indirect materials are requisitioned for use in production, the cost is debited to which account?
Work in Process Inventory
Manufacturing Overhead
Raw Materials Inventory
Finished Goods Inventory
Indirect materials are treated as part of manufacturing overhead rather than traced directly to production. When requisitioned, they are debited to Manufacturing Overhead. .
On a materials requisition slip, the cost of materials is normally shown at:
Historical cost
Standard cost
Actual cost
Budgeted cost
Materials requisition slips record the actual cost of materials issued to production so that cost records reflect real expenditures. Standard or budgeted costs may be used for variance analysis but do not appear on the requisition. .
Which account is credited when direct materials are requisitioned?
Raw Materials Inventory
Manufacturing Overhead
Work in Process Inventory
Finished Goods Inventory
Issuing direct materials to production reduces the Raw Materials Inventory, so this account is credited. The corresponding debit is to Work in Process Inventory. .
Direct materials placed into production appear on the balance sheet as part of:
Work in Process Inventory
Finished Goods Inventory
Raw Materials Inventory
Cost of Goods Sold
Once direct materials are committed to production, they become part of Work in Process Inventory until completion of the goods. At that point they move to Finished Goods Inventory. .
In a normal materials flow, materials move from the storeroom directly into:
Work in Process Inventory
Finished Goods Inventory
Cash
Selling Expenses
Direct materials flow out of the storeroom and directly into Work in Process Inventory as the production process begins. They only reach Finished Goods after completion. .
Direct materials cost is classified as which type of cost under absorption costing?
Mixed cost
Sunk cost
Period cost
Product cost
Direct materials are a component of product costs under absorption costing because they are integral to the production of inventory. These costs are capitalized until goods are sold. .
In a process costing system where materials are added at the beginning of the process, equivalent units for materials in ending Work in Process will be:
Prorated based on labor hours
50%
0%
100%
If materials are added at the start of a process, all units in ending Work in Process have received 100% of the materials needed. Labor and overhead may vary. .
Which journal entry correctly records the requisition of direct materials for production?
DR Work in Process, CR Raw Materials
DR Raw Materials, CR Cash
DR Cost of Goods Sold, CR Raw Materials
DR Manufacturing Overhead, CR Wages Payable
Requisitioning direct materials decreases Raw Materials Inventory (credit) and increases Work in Process Inventory (debit). This records materials entering production. .
In job costing, the cost of direct materials is traced to individual jobs using:
Time tickets
Standard cost sheets
Purchase orders
Materials requisition slips
Materials requisition slips document the exact quantity and cost of materials drawn for each job, allowing accurate tracing of direct materials. .
Under FIFO process costing, the cost of direct materials in beginning inventory is:
Excluded from current period cost
Blended with current period costs
Included at current period cost
Accounted for separately at its original cost
Under FIFO, beginning inventory costs are kept separate at their original amounts. Current period costs apply only to units started and completed during the period. .
Which of the following would NOT be classified as a direct material in manufacturing a car?
Seats
Engine
Screws used to hold interior panels
Windshield
Screws are low-cost, minor items that can't be traced economically to individual units, so they are treated as indirect materials and included in manufacturing overhead. .
If a company underapplies manufacturing overhead, adjusting it at year-end will cause Cost of Goods Sold to:
Be reallocated to finished goods only
Decrease
Increase
Remain unchanged
Underapplied overhead means actual overhead exceeded applied. To correct, the shortfall is added to Cost of Goods Sold, increasing expense. .
Which statement describes the treatment of direct and indirect materials in manufacturing costs?
Both direct and indirect materials are charged to Work in Process Inventory
Direct materials go to Finished Goods; indirect go to WIP
Direct materials go to WIP; indirect materials go to Manufacturing Overhead
Both are considered period costs
By definition, direct materials are charged directly to Work in Process, while indirect materials are pooled in Manufacturing Overhead and allocated later. .
In a standard cost system, direct materials variances include which two components?
Mix and yield variances
Volume and capacity variances
Efficiency and idle time variances
Price and usage variances
Direct materials variances arise from differences in the actual price paid versus the standard price (price variance) and actual usage versus standard usage (usage variance). .
A company uses a predetermined overhead rate based on direct labor hours. Direct materials requisitioned total $50,000. Direct labor hours worked are 10,000 DLH and the rate is $5 per DLH. Actual overhead costs were $55,000. What amount of overhead is applied?
$45,000
$60,000
$50,000
$55,000
Applied overhead equals the predetermined rate ($5) times actual direct labor hours (10,000), resulting in $50,000. Actual overhead cost does not affect the application calculation. .
In activity-based costing, direct materials are allocated to cost objects based on:
Machine hours
Number of production orders
Quantity of materials used per unit
Direct labor hours
Even in ABC, direct materials remain traceable and are assigned based on actual quantity used per unit, while overhead costs use multiple cost drivers. .
When a process generates scrap material that cannot be reused, the cost of that scrap is recorded as:
Manufacturing Overhead
Scrap Disposal Expense
Cost of Goods Sold
Raw Materials Inventory
Non-reusable scrap is an expense and is recorded in a Scrap Disposal Expense account rather than being included in inventory or overhead. .
Under a backflush costing system, direct materials costs are typically charged to:
Cost of Goods Sold
Manufacturing Overhead
Raw Materials Inventory
Work in Process Inventory
Backflush costing bypasses WIP and assigns material costs directly to Cost of Goods Sold upon completion or sale, simplifying record-keeping in JIT environments. .
On a job cost sheet, direct materials costs are recorded at:
Budgeted cost
Actual cost from requisition slips
Historical cost at year-end
Standard cost
Cost sheets use the actual cost of materials as documented by requisition slips to accurately track job expenses. Standard costs are used separately for variance analysis. .
Under variable costing, how are direct materials treated?
As a period cost
As a product cost
Included in manufacturing overhead
Expensed when incurred
Variable costing treats direct materials, direct labor, and variable overhead as product costs. Fixed overhead is expensed period-by-period. .
The cost of materials in abnormal spoilage is charged to which account?
Cost of Goods Sold
Loss from Abnormal Spoilage
Raw Materials Inventory
Manufacturing Overhead
Abnormal spoilage reflects inefficiencies beyond normal expectations, so its cost is expensed to a Loss from Abnormal Spoilage account. Normal spoilage goes into overhead. .
Which costing method is not permitted under IFRS for valuing inventories?
Standard costing
Variable (direct) costing
Activity-based costing
Absorption costing
IFRS requires inventory to be valued using absorption costing for external reporting and does not permit variable or direct costing methods for financial statements. .
In lean accounting, direct material requisitioning differs from traditional systems by:
Eliminating double-entry accounting
Using consumption triggers instead of detailed requisition slips
Charging materials to Finished Goods immediately
Pooling all material costs in Work in Process
Lean accounting often uses simple consumption triggers or kanban signals to record material usage, reducing paperwork and focusing on flow rather than traditional requisition documentation. .
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Study Outcomes

  1. Understand Direct Materials Requisition -

    Recognize when direct materials are requisitioned and how they flow directly into the work-in-process account, reinforcing the core concept of manufacturing cost flow.

  2. Analyze Cost System Flow -

    Examine how direct materials move through different types of cost systems, tracking entries from requisition to final production stages.

  3. Differentiate Costing Methods -

    Compare job order versus process costing in the allocation of direct materials, highlighting the strengths and limitations of each approach.

  4. Apply Requisition Data -

    Use requisition records to perform calculations of direct materials usage and ensure accuracy within manufacturing cost flow processes.

  5. Evaluate System Impact -

    Assess how the choice of cost system affects direct materials accounting in terms of complexity, accuracy, and reporting requirements.

  6. Interpret Quiz Results -

    Review your performance to identify areas for improvement in understanding when direct materials are requisitioned and overall manufacturing cost flow.

Cheat Sheet

  1. Direct Materials and Work in Process -

    When direct materials are requisitioned they flow directly into Work in Process Inventory, reflecting the moment materials are issued for production. The journal entry Debit Work in Process, Credit Raw Materials shows this transfer and you can remember it by the mnemonic "DR WIP, CR RM" to keep the flow straight. (Source: Horngren's Cost Accounting, Pearson)

  2. Manufacturing Cost Flow Cycle -

    The standard cost flow in manufacturing goes Raw Materials → Work in Process → Finished Goods → Cost of Goods Sold, summarized by the formula COGM = Beginning WIP + Direct Materials + Direct Labor + Manufacturing Overhead - Ending WIP. Tracking each stage helps ensure accuracy and control over production costs, and it's a staple in direct materials accounting quizzes. (Source: Garrison, Noreen & Brewer)

  3. Job Order vs Process Costing -

    In job order costing, direct materials are assigned to specific jobs via requisition forms, while process costing accumulates materials by department or process. Use the "Job Journey vs Process Path" mnemonic: think jobs get individual passes, processes get pooled passes to remember the distinction. (Source: University of Texas)

  4. Role of the Materials Requisition Form -

    A properly completed materials requisition form authorizes the release of raw materials and records the date, quantity, and job number, enabling accurate cost tracing. Treat it as your production GPS - without it, materials movement lacks clear direction and control. (Source: CIMA Official)

  5. Direct vs Indirect Materials -

    Direct materials are traceable to the final product, such as steel in car frames, whereas indirect materials (like lubricants) are charged to Manufacturing Overhead. Remember: if you can tag it to a job, it's direct; if not, it's indirect. (Source: IMA Standards)

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