Reference: 04-08
Information About Units Processed and Processing Costs Incurred

question 24

Multiple Choice

Reference: 04-08
Information about units processed and processing costs incurred during a recent month in the Blending
Department of a manufacturing company follow: $$\begin{array} { | l | l | l | } \hline & \begin{array} { l } \text { Number of } \\\text { Units }\end{array} & \begin{array} { l } \text { Conversion Costs } \\\text { (Percent Completion) }\end{array} \\\hline \text { Beginning work in process inventory } & 11,000 & 35 \% \\\hline \text { Units started into production } & 120,000 & - \\\hline \text { Units completed and transferred out } & 114,000 & - \\\hline \text { Ending work in process inventory } & 17,000 & 30 \% \\\hline\end{array}$$ The beginning work in process inventory included $11,000 of conversion cost and $ 12,000 in material costs. During the month, the Department incurred an additional $290,000 in conversion costs and $ 143,000 in material costs. All materials are added at the beginning of production in each department.
-Assuming that the company uses the weighted-average cost method, what is the cost per equivalent unit for conversion costs for the month in the Blending Department

• A)$2.53.
• B)$2.55.
• C)$2.50.
• D)$2.44.

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Definitions:

Laspeyres Price Index

An index that measures the change in the cost of purchasing a fixed basket of goods and services, using the prices of a base period.

Per Capita Income

A measure of the average income earned per person in a specified area over a defined period of time, often used as an indicator of economic health.

WARP

Weak Axiom of Revealed Preference, a theory in economics that assumes if a consumer prefers product A over B when both are available, then they will not choose B when A is available.

Bundle

An assortment of items or services combined and offered for sale as a complete set.