Refer to the Following Selected Financial Information from Dodge Company

question 120

Multiple Choice

Refer to the following selected financial information from Dodge Company.Compute the company's acid-test ratio. $\begin{array}{lr}\text { Cash } & \$ 42,250 \\\text { Short-term investments } & 60,000 \\\text { Accounts receivable, net } & 79,500 \\\text { Merchandise inventory } & 115,000 \\\text { Prepaid expenses } & 9,700 \\\text { Accounts payable } & 111,400\end{array}$

• A)2.75.
• B)2.66.
• C)0.92.
• D)1.12.
• E)1.63.

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Definitions:

Conversion Costs

Costs incurred to convert raw materials into finished products, typically including direct labor and manufacturing overhead.

Machine Operator's Wages

The compensation paid to workers who operate machinery, typically categorized as direct labor costs in manufacturing.

First-In-First-Out (FIFO)

An inventory valuation method where the oldest inventory items are used up or sold first.

Work in Process

This term refers to the materials, labor, and overhead costs for products that are in the production process but are not yet complete.