Unformatted text preview: 16-2116-36 (continued)It is important when looking at an operation such as that of the newplant to recognize that units of completed product output may not bethe best measure of plant activity for a month. We commonly havegoods-in-process inventories of varying amounts and at varying stagesof completion at the end of the month. Since materials costs and someconversion costs must be incurred for these inventories, too, ignoringthem can be misleading. I have recalculated per unit costs for themonth of June for both the old and the new plants. Notice that I havecalculated materials and conversion costs per unit separately and thatI have determined equivalent units for each cost element and used themin the per unit calculations. My per unit cost computations show Juneperformance in proper perspective and indicate that while no materialscost per unit differences exist between the two plants, the new plant...
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- Fall '07