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question 12 from kaplan kit
A paint manufacturer has a number of departments.First is mixing department- mixing Raw/materials in large vessels, Second is color adding department- adding color to all the vessels and Third pouring dept.- poring color in the vessels into liter sized tins department.
Which st. is correct
1. mixing dept is a cost center
2. a suitable cost unit for color adding dept. is a liter tin of cansAnswer say st. 1 is correct
st. 2 is not correct as paint is not poured into tins until after the color adding department,so its not a suitable cost unit for for color adding dept.this answer of st.2 create the question does every processing department made a suitable cost unit or what.
i thought cost unit remains same and it goes thru all the processing departments. can u plz explain this why is this so.or it means no department in process will have cost units until the finishing process department where it takes the form of units like in this case its pouring department.
In the colour adding department there are no tins (they do not appear until the third department) and so tins cannot possibly be the cost unit for that department.
So if they want a cost unit for the colour adding department it would be one litre of paint – not a tin of paint.
one last thing
as u have said that in color adding department they can take “litre of paint” as cost units. So in case there are Work In Progress units in that department ,we convert them into notional units as per “liters of paint” for calculation purpose .
Right?
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