Beginning Work in Process Consists of 7,000 Units, 55% Complete

question 66

Multiple Choice

Beginning work in process consists of 7,000 units, 55% complete. 50,000 units were started and ending work in process is 5,000 units, 25% complete. Normal spoilage is equal to 10% of the units inspected. The inspection point occurs at the 20% point and 7,000 units were rejected. Direct materials are added at the 50% point, direct labour at 30% and overhead is applied uniformly. The costs per equivalent unit are: direct material $1.00; direct labour $1.50; overhead $2.00.
The equivalent units of labour are:

• A) 48,000
• B) 45,000
• C) 46,000
• D) 46,500

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Definitions:

Bad Debts Expense

An expense reported on the income statement, representing the estimated amount of credit sales that are not expected to be collected.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of accounts receivable that may not be collectible.

Bad Debts Expense

A non-cash expense that represents accounts receivable that a company no longer expects to collect, indicating customers are unlikely to pay their outstanding debts.

Allowance Method

An accounting technique used to estimate and account for potential uncollectible accounts receivable as an expense against current period income.