The Davidson Company Uses a Weighted Average Process Costing System

question 154

Multiple Choice

The Davidson Company uses a weighted average process costing system. The following information was reported for the Assembly Process for January. Materials are added at the beginning of the process and are 100%. $$\begin{array} { | l | r | r | } \hline \text { Units: } & { \text { units } } & \begin{array} { c } \% \text { complete for } \\\text { conversions }\end{array} \\\hline \text { work in process, } 1 / 1 & 60,000 & 15 \% \\\hline \text { started } & 105,000 & \\\hline \text { work in process, } 1 / 31 & 40,000 & 20 \% \\\hline \\\hline \text { Costs: } & & \\\hline & \text { Materials } & \text { Conversion } \\\hline \text { beginning work in process } & \$ 16,500 & \$ 33,250 \\\hline \text { current costs } & \$ 643,500 & \$ 332,500 \\\hline\end{array}$$ What is the cost per unit for conversion?

• A)$2.79
• B)$2.75
• C)$2.50
• D)$2.22
• E)none of the above

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Definitions:

Expectations Theory

A theory suggesting that long-term interest rates reflect the market's expectation for future short-term rates.

Liquidity Preference Theory

Theory that investors demand a risk premium on long-term bonds. Implies that the forward rate generally will exceed the expected future interest rate.

Treasury Bond

A Treasury bond is a long-term, fixed-interest government debt security with a maturity of 20 to 30 years and pays interest every six months.

STRIPPED Cash Flows

Cash flows that are separated or "stripped" from an asset for investment or valuation purposes, often for the construction of zero-coupon bonds.