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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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When materials costs differ significantly among products in a value stream, the value-stream product cost is calculated by which of the following?

  1. a. Unit Materials Cost + Value-Stream Costs/Units Shipped
  2. b. Unit Materials Cost + Value-Stream Conversion Costs/Units Shipped
  3. c. Value-Stream Costs/Units Produced
  4. d. Value-Stream Costs/Units Shipped

To determine

Find the correct formula for calculating the value stream product cost in case when material costs differ significantly among products in a value stream.

Explanation

Value Stream:

Value stream consists of the processes through which a product goes; that is from procurement to delivery. In value stream, all processes are covered whether or not they add value to the product.

b.

In case, material costs differ significantly, then for computing value stream cost of a product following formula is to be used:

Valuestreamproductcost=(UnitMaterialcostUnitsshipped)+(Valuesteamconversion

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