Tong, Inc Is a Manufacturing Company That Uses a Process Costing

question 110

Multiple Choice

Tong, Inc. is a manufacturing company that uses a process costing system. All direct material is added at the start of the process, and spoilage is discovered at the end. During the first period of operations 15,000 units of material were placed into production at a cost of $20 each (ignore conversion costs for this process) . Ending work in process was 2,000 units, good units completed totalled 11,000 units, and normal spoilage is 15% of the units surviving inspection. Inspection takes place after the units are completed.
The unit cost assigned to the normal spoilage is:

• A) $-0-
• B) $22.61
• C) $20.00
• D) $24.00

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Definitions:

Cash Flows

The total amount of money being transferred into and out of a business, especially affecting its liquidity.

Financial Lease

A financial lease is a lease in which the lessee has substantially all the risks and rewards incidental to ownership of the leased asset, often with an option to purchase the asset at the end of the lease term.

Capital Lease

A lease classified as a purchase by the lessee, obligating them to record the leased asset as an owned asset in their financial statements.

Partially Amortized

A loan repayment plan where the total sum borrowed is not fully paid off by the end of the loan term, leaving a lump sum due as a "balloon payment."