The Cost of Production Report for August Shows Conversion Costs

question 187

Multiple Choice

The cost of production report for August shows conversion costs for 5,000 gallons, 70% complete, to be $2,450. The conversion cost per equivalent unit in July was $0.75. Which of the following best describes the change in the conversion costs between the two months?

• A)The conversion costs increased by $0.05 per unit, indicating an improvement.
• B)The conversion costs increased by $160 overall, indicating an unfavorable change.
• C)The conversion costs decreased by $0.05 per unit, indicating an improvement.
• D)The conversion costs decreased by $0.05 per unit, indicating an unfavorable change.

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Definitions:

Subsidiary Ledger

A detailed ledger that contains the individual accounts needed to support a major ledger account, such as accounts receivable, where individual customer accounts are detailed.

Control Account

An account used in the general ledger to summarize and keep track of transactions relating to a specific aspect of a company's finances, such as accounts receivable or payable.

General Ledger

A comprehensive record of all financial transactions within an organization, serving as the foundation for a company's financial statements.

Cash Payments Journal

A financial journal that records all cash outflows or payments made by a business, including expenses, debt payments, and purchases.