Cashan Corporation Makes and Sells a Product Called a Miniwarp

question 162

Multiple Choice

Cashan Corporation makes and sells a product called a Miniwarp.One Miniwarp requires 1.5 kilograms of the raw material Jurislon.Budgeted production of Miniwarps for the next five months is as follows: The company wants to maintain monthly ending inventories of Jurislon equal to 30% of the following month's production needs.On July 31, this requirement was not met since only 10, 400 kilograms of Jurislon were on hand.The cost of Jurislon is $4.00 per kilogram.The company wants to prepare a Direct Materials Purchase Budget for the next five months. The total cost of Jurislon to be purchased in August is:

• A)$149, 860
• B)$252, 400
• C)$191, 460
• D)$147, 000

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Definitions:

Conversion Costs

The combined total of direct labor costs and manufacturing overhead expenses, indicating the expenses required to transform raw materials into completed products.

Equivalent Units

A concept used in cost accounting to express the amount of work done by complete and incomplete units in terms of fully completed units.

Processing Department

A division or unit in a manufacturing facility where a specific type of processing or operation is performed.

Conversion Costs

The sum of direct labor and manufacturing overhead expenses, representing the costs to convert materials into finished goods.