Additional Materials Are Added in the Second Department of a Four-Department

question 118

Multiple Choice

Additional materials are added in the second department of a four-department production process. However, this addition does not increase the number of units being produced in the second department, but will:

• A) increase the equivalent units of production.
• B) increase the total cost per unit.
• C) decrease the value of the transferred-in costs.
• D) decrease the total costs to account for.

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Definitions:

Depreciation Expense

An accounting method of allocating the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.

Prepaid Insurance

An asset account that represents insurance premiums paid in advance, which have not yet expired at the time of the balance sheet.

Wages

The monetary compensation paid by employers to employees in exchange for their labor, typically calculated on an hourly, daily, or piecework basis.

Financial Reports

Documents that contain detailed information about a company's financial health, including balance sheets, income statements, and cash flow statements.