Travers Company Sets Prices Equal to Cost Plus 55

question 56

Multiple Choice

Travers Company sets prices equal to cost plus 55%. Recently, the company charged a customer a price of $60 for an item. What was the cost of the item?

• A) $25.20
• B) $38.71
• C) $40.32
• D) $42.00

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Definitions:

Process Costing

A cost accounting method used when homogenous products are produced on a continuous basis, allocating costs to each processing department or stage.

Conversion Costs

The sum of labor and overhead costs necessary to convert raw materials into finished products.

Forming Department

This is a specific section within a manufacturing facility where raw materials are shaped into components or products.

Equivalent Unit

a concept used in cost accounting to represent a partial unit of production, allowing for the calculation of costs for partially completed products.