Samantha's Office Supplies Manufactures Desk Organizers in Its Processing Department

question 127

Multiple Choice

Samantha's Office Supplies manufactures desk organizers in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After inspection, some units are spoiled due to undetectable material defects. Spoiled units generally constitute 5% of the good units. Data provided for February 2017 are as follows:

What costs are allocated to the ending work-in-process inventory for direct materials and conversion costs, respectively, using the FIFO method of process costing? (Round any cost per unit calculations to the nearest cent.)

• A) $1,285,820; $8124
• B) $62,816; $32,980
• C) $64,291; $8124
• D) $40,619; $12,552

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Definitions:

Marginal Cost

Marginal cost is the increase in total production cost that arises from producing one additional unit of a product or service.

Subsidy

A financial contribution granted by the government or a public body to help an industry or business keep the price of a commodity or service low.

Marginal Costs

The increase in cost resulting from the manufacture of one additional unit of a good or service.

Decreasing Costs

Situations in which costs diminish as the level of production or scale of operations increases.