A Department Adds Materials at the Beginning of the Process

question 66

Short Answer

A department adds materials at the beginning of the process and incurs conversion costs uniformly throughout the process. For the month of July, there was no beginning work in process; 40,000 units were completed and transferred out; and there were 20,000 units in the ending work in process that were 40% complete. During July, $120,000 materials costs and $105,000 conversion costs were charged to the department.
The unit production costs for materials and conversion costs for July was $\begin{array}{lll}&\text { Materials }&\text {Conversion Costs }\\\text { a. } & \$ 2.00 & \$ 1.75 \\\text { b. } & \$ 2.00 & \$ 2.19 \\\text { c. } & \$ 2.50 & \$ 1.75 \\\text { d. } & \$ 3.00 & \$ 2.66\end{array}$

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Definitions:

Variable Cost

Costs that change directly and proportionally with the level of production output or sales volume.

Nonprofit Organization

An organization that operates for educational, charitable, social, religious, or other activities serving the public interest or common good, without the goal of making profits for owners or shareholders.

Break-Even Level

The point at which total revenues equal total expenses, resulting in neither profit nor loss.

Variable Cost

Costs that vary directly with the level of production or sales volume, such as raw materials and packaging.