Final answer:
Work in Process Inventory in a standard cost system is debited with standard costs related to the level of input activity. Standard costs help in budgeting and tracking efficiency by analyzing variances between expected and actual costs.
Step-by-step explanation:
In a standard cost system, Work in Process Inventory is typically debited with standard costs based on the level of input activity (such as direct labor hours worked). This approach aligns with the idea that variable costs, such as labor and raw materials, fluctuate with the level of production output. Therefore, standard costs facilitate budgeting and cost control, as they represent the expected cost under normal operating conditions. These costs provide a basis for variance analysis, comparing actual costs to standard costs to identify areas for efficiency improvements.
In a standard cost system, Work in Process Inventory is ordinarily debited with actual costs of material and labor and a predetermined overhead cost for overhead. This means that the actual costs of material and labor used in production are recorded and added to the Work in Process Inventory account. Additionally, a predetermined overhead cost, which is an estimate of the overhead expenses based on a predetermined rate, is also debited to the Work in Process Inventory account. This helps to allocate the overhead costs to the inventory.