In a process cost system,how is the unit cost affected in a production cost report when materials are added in a department subsequent to the first department and the added materials result in additional units?
A)It causes an increase in the preceding department's unit cost that necessitates an adjustment of the transferred-in unit cost.
B)It causes a decrease in the preceding department's unit cost that necessitates an adjustment of the transferred-in unit cost.
C)It causes an increase in the preceding department's unit cost but does not necessitate an adjustment of the transferred-in unit cost.
D)It causes a decrease in the preceding department's unit cost but does not necessitate an adjustment of the transferred-in unit cost.

Question

Quizplus · Accepted Answer

When additional materials are added in a subsequent department, it means that the units produced in that subsequent department will have a lower material cost per unit compared to the units produced in the preceding department. This will cause a decrease in the unit cost of the preceding department's output, which will require an adjustment of the transferred-in unit cost.

In a Process Cost System,how Is the Unit Cost Affected