Question

Direct labor and indirect labor are recorded, respectively, to:A. Factory Overhead and Goods in Process.B. Goods in Process and Finished Goods.C. Finished Goods and Goods in Process.D. Goods in Process and Factory Overhead.E. Cost of Goods Sold and Finished Goods.

Answer 1

Answer: The correct answer is "D. Goods in Process and Factory Overhead."

Explanation: Direct labor: it is the labor consumed in the areas that are directly related to production. It is generated by the workers or operators of the company. It is part of the cost that is incorporated directly into the product. Therefore it is registered as goods in process.

Indirect labor: it is the labor consumed in the administrative areas of the company or that production staff that does not participate directly in the production of the good. As it is part of the cost that is indirectly incorporated into the product, it is considered factory overheads.