Lowery Corporation, Which Uses an Operation-Costing System, Has Three Processing

question 55

Essay

Lowery Corporation, which uses an operation-costing system, has three processing departments. All units pass through Department no. 1; upon completion, 70% of the goods are sent to Department no. 2 and 30% are sent to Department no. 3. Additional data follow.
· Forty thousand units were manufactured during the year.
· Conversion cost in each department was: No. 1, $380,000; no. 2, $196,000; and no. 3, $150,000.
· Batch no. 67, which consisted of 500 units, was sent to Department no. 3 for its additional processing. Direct materials of $23,500 and $11,900 were introduced to this batch in Department nos. 1 and 3, respectively.
Lowery assigns conversion cost to goods manufactured on the basis of units produced.
Required:
A. Determine the conversion cost per unit in Department no. 1, Department no. 2, and Department no. 3.
B. Compute the total cost of batch no. 67.
C. Operation costing is sometimes referred to as a hybrid costing system. Briefly explain.

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Definitions:

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