Question

When determining the cost of a manufactured good under an operation-costing system, a company would: often switch to a job-costing system to simplify recordkeeping procedures. trace direct-material cost and actual conversion cost to each product produced. use a predetermined application rate for both direct-material cost and conversion cost. trace direct-material cost to each product produced and use a predetermined application rate for conversion cost. trace actual conversion cost to each product produced and use a predetermined application rate for direct material.

Answer 1

The correct answer is letter "D": trace direct-material cost to each product produced and use a predetermined application rate for conversion cost.

Step-by-step explanation:

The Operation-costing system combines Process Costing with Job costing. Process costing is mostly used for mass-production undifferentiated goods so each product will be given the same cost. Job Costing, instead, is typically used for manufacturers of tailored products, thus, each product has different material, direct labor, and overhead costs.

So, to determine the costs of manufactured goods under the operation-costing system, direct material should be allocated separately and the use of an application will be necessary to determine the conversion cost -the combination of direct labor and overhead.