Question

AllWeather makes umbrellas and uses a process cost system. Each day, AllWeather produces 640 umbrellas; each accounting period, AllWeather produces 18,200 umbrellas; each year, AllWeather produces 72,000 umbrellas. In addition, AllWeather completes about 100 production runs per year. When should AllWeather’s production departments determine their total manufacturing costs?
a) At the end of each production run
b) At the end of each year
c) At the end of each day
d) At the end of each period

Answer 1

Answer:

d) At the end of each period

Explanation:

"Total manufacturing cost is the aggregate amount of cost incurred by a business to produce goods in a reporting period. [...] The more common usage of the term is that total manufacturing cost follows the first definition, and so is the amount charged to expense in the reporting period." This is why AllWeather estimates about 100 production runs per year.

Reference: Bragg, Steven. “Total Manufacturing Cost.” AccountingTools, AccountingTools, 21 Jan. 2019