Question

All of the following statements about an operation-costing system are true except: a. direct-material cost is traced to each batch produced. b. conversion costs are applied to products on a departmental basis using a predetermined application rate. c. batches of product pass sequentially through the same processes. d. direct material and conversion costs are traced to each batch of product produced. e. conversion activities are similar across product lines but direct materials differ significantly.

Answer 1

Answer:

The correct answer is letter "D": direct material and conversion costs are traced to each batch of product produced.

Explanation:

The operation-costing system is based on the principle that in large entities where manufacturing is almost the same for all products, costs can be assigned to units produced and the result of adding all those costs should equal the costs assigned in groups of units produced or batches.

Conversion costs are a combination of direct labor and manufacturing overhead costs. Conversion costs are traced by adding the direct costs to the conversion costs of an operation day by the number of units produced in the day.