[Anonymous]

One of Becker’s multiple choice question explanation says “conversion cost pricing could be used when the customer furnishes the material used in manufacturing a product.”

I don’t get what that means nor understand what “furnishing” means.

Can someone explain what this means, and perhaps use an example?

Thanks a bunch

[mla1169]

Its exactly what it sounds like, the material used in production is “given” to the manufacturer at no cost by the customer. For example, we have a customer who had in stock all of the material that they wanted us to use to build their widgets. They shipped it all to us at $0. We purchased the balance of the materials on the BOM, but the unit cost that would show in our system would be decremented by the amount of material that we did not pay for.

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Massachusetts CPA (non reporting) since 3/12.

[Author]

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