Upton Knitters Manufactures Sweaters and Uses an Operation-Costing System

question 72

Essay

Upton Knitters manufactures sweaters and uses an operation-costing system. All sweaters are processed through Department no. 1, with subsequent processing taking place in Department no. 2 or Department no. 3, depending on the type of fabric used. Twenty thousand sweaters were produced during the year; there was no beginning or ending work in process. Sixty percent of the goods were sent to Department no. 2 for manufacturing.
Conversion cost incurred in the three departments totaled $504,000, subdivided as follows: Department no. 1, $360,000; Department no. 2, $60,000; and Department no. 3, $84,000.
Data pertaining to two representative orders, nos. 545 and 567, were:

Required:
A. Explain the nature of operation costing.
B. Determine the cost of order nos. 545 and 567.

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Definitions:

Test Markets

Regional markets or demographic groups used for launching new products to evaluate consumer response before a national rollout.

Competitors

Businesses or individuals that compete within the same market for resources and customers.

Information Technology

Includes all of the computing resources that collect, store, and analyze data.

Nonpersonal Source

A communication or marketing message delivered through media or other channels that do not involve personal contact or direct interaction.