Final answer:
In a traditional job-order cost system, the issue of indirect materials increases Work-in-process inventory because they are a part of manufacturing overhead associated with production jobs and are included in WIP accounts when allocated to the job's total costs.
Step-by-step explanation:
In a traditional job-order cost system, the issue of indirect materials to a production department increases the Work-in-process inventory. Indirect materials are considered to be part of the manufacturing overhead and are not directly traceable to the end product. They are allocated to the total costs of the job and included in the Work-in-Process (WIP) accounts. Thus, when indirect materials are issued to a production department, it is the WIP inventory that gets increased, not the direct labor costs, selling expenses, or administrative expenses.
As we consider the principles of variable costs, it is clear that they are the costs that vary with the level of output, and typically include both labor and raw materials. In this context, labor is treated as a variable cost, since more output generally requires more labor. However, the indirect materials talked about in the question, even though they are variable costs, particularly affect the WIP inventory as they are part of the overhead that is allocated to each job as it progresses through the production process.