Comprehensive and Detailed 150 to 250 words of Explanation From SAP S/4HANA Cloud Public Edition, Management Accounting documents:

In Event-Based Production Accounting, every operational event triggers an immediate financial update to ensure real-time accuracy. Performing a final goods issue leads to increased direct material costs because the remaining raw materials required for the order are withdrawn from inventory and debited to the production order cost object13. Simultaneously, the final activity confirmation—which records labor and machine time—results in increased direct production costs (making Option D incorrect) as internal activities are allocated to the order141414.

Furthermore, these events trigger increased overhead costs15. The system automatically recalculates material and production overhead based on the newly posted direct costs, applying rates defined in the costing sheet immediately16. Because the order is not yet final-delivered, all these accumulated costs result in increased work in progress (WIP) costs on the balance sheet17. This real-time update ensures that the financial statement reflects the current value of unfinished production throughout the period, rather than waiting for month-end processing.