Process Costing System-Determining Unit Costs

question 16

Essay

Process costing system-determining unit costs
Houston Oil Company uses a process costing system with two departments: (a) a Refining Department and (b) a Packaging Department. During June, its first month of operations, the company manufactured and sold 650,000 gallons of motor oil, generating total revenue of $3,845,000. The company incurred the following manufacturing costs in June:

(a) How much was the unit cost per gallon of oil processed by the Refining Department in June?
(b) If each case of oil contains four gallons, how much was the unit cost per case incurred by the Packaging Department in June?
(c) How much was the unit cost per case transferred to finished goods in June?
(d) How much total gross profit (sales less cost of goods sold) was generated by the company in June?

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Definitions:

Supply-side

An economic theory that emphasizes the role of supply in fostering economic growth by reducing taxes and decreasing regulation, with the intent of increasing production.

Monetarism

A school of economics that places paramount importance on money as the key determinant of the level of prices, income, and employment.

Velocity of Circulation

The rate at which money is exchanged in an economy, often used to represent the activity level in the financial system.

Expected Profit Rate

The anticipated return on an investment, taking into account both the probability of gains and the risk of losses.