Multiple Choice
Which of the following is considered an internal user of accounting information?
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1. Introduction to Accounting
Types of Accounting
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In a process costing system, how many Work in Process (WIP) accounts does each department typically use?
A
One
B
Two
C
None
Verified step by step guidance1
Understand the concept of a process costing system: In a process costing system, costs are assigned to departments or processes rather than individual jobs. This system is commonly used in industries where production is continuous, such as manufacturing or chemical processing.
Learn about Work in Process (WIP) accounts: A Work in Process account tracks the costs of partially completed goods within a department. These costs include direct materials, direct labor, and manufacturing overhead.
Recognize the role of departments in process costing: Each department in a process costing system is responsible for a specific stage of production. Costs are accumulated separately for each department to ensure accurate tracking and allocation.
Understand the typical use of WIP accounts: In a process costing system, each department typically uses one Work in Process account to record the costs associated with its production stage. This simplifies cost tracking and reporting.
Confirm the correct answer: Based on the explanation, the correct answer is 'One,' as each department typically uses one Work in Process account in a process costing system.
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