Nettle CoUses Process Costing to Account for the Production of Rubber

question 87

Multiple Choice

Nettle Co.uses process costing to account for the production of rubber balls.Direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process.Equivalent units have been calculated to be 12,000 units for materials and 10,000 units for conversion costs.Beginning inventory consisted of $14,000 in materials and $8,000 in conversion costs.April costs were $72,000 for materials and $80,000 for conversion costs.Ending inventory still in process was 4,000 units (100% complete for materials,50% for conversion) .The cost per unit for conversion costs using the FIFO method would be:

• A)$8.00
• B)$8.80
• C)$2.20
• D)$17.40

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Definitions:

Degree Of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to its sales.

Contribution Format

A financial statement format that separates fixed costs from variable costs to highlight the contribution margin of products or services.

Margin of Safety

The difference between actual sales and the break-even point, used to evaluate the level of risk in a business operation.

Break-even Sales

The amount of revenue required to cover total fixed and variable costs, at which point a business neither makes a profit nor incurs a loss.