Question

Purchased materials are added in the second department of a three-department process; this increases the number of units produced in the second department and would always _________.

• A. change the direct labour cost percentage in the ending work in process inventory
• B. cause no adjustment to the unit cost transferred in from the first department
• C. increase total unit costs.
• D. decrease total ending work in process inventory.

Answer 1

Answer: (D)

decrease total ending work in process inventory.

Process costing is method of costing under which all cost are accumulated for each of the process and the cost per unit is ascertain at each stage of production by dividing the cost of each process by the normal output of that process.

Purchase of direct material added in second department, this increases the number of units produced in the second department and it decreases the total ending work in process inventory.