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

question 72

Essay

Levitt 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.
Levitt 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:

Promotional Allowance

A discount or financial incentive provided to retailers or wholesalers to encourage the promotion and sale of a product.

Gross Margin

The difference between revenue and cost of goods sold (COGS), expressed as a percentage of revenue, indicating the financial health and efficiency of a company's production process.

Price Special Promotion

Refers to temporary measures undertaken by a business to reduce prices or offer discounts to boost sales of products or services.

Geographic Adjustments

Modifications made to prices, wages, or data taking into account the geographical differences such as cost of living or market conditions.