The Computation of Equivalent Units Under the FIFO Method

question 140

Multiple Choice

The computation of equivalent units under the FIFO method:

• A) treats units in the beginning work-in-process inventory as if they were started and completed during the current period.
• B) treats units in the beginning work-in-process inventory as if they represent a batch of goods separate and distinct from goods started and completed during the current period.
• C) treats units in the ending work-in-process inventory as if they were started and completed during the current period.
• D) ignores units in the beginning and ending work-in-process inventories.

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Definitions:

Peak Efficiency

The maximum performance level at which a system, process, or machine operates with optimal effectiveness and minimal waste.

Break-Even Point

The level of production or the volume of sales at which total costs equal total revenue, meaning there is no profit or loss.

Shutdown Point

The level of operations at which a business does not generate enough revenue to cover its variable costs, leading to a temporary or permanent cessation of production.

Average Variable Cost

The total variable costs of production divided by the quantity of output produced, representing the cost of producing one more unit of output.