When Using the Weighted Average Costs Method, the Cost of Beginning

question 4

Multiple Choice

When using the weighted average costs method, the cost of beginning inventory is:

• A)Added to the cost for the current month to determine the cost per equivalent unit.
• B)Considered separately from costs incurred during the current month.
• C)Ignored in calculating the cost per equivalent unit for the current month.
• D)Added only to the units completed during the period.
• E)None of the above.

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Definitions:

Incremental Working Capital

The additional amount of net working capital that a company needs to invest in a project.

Opportunity Cost

The value of the best alternative that is foregone when a particular course of action is chosen.

Incremental Cash Flow

is the additional cash flow generated by a company from a new project or investment, used to analyze the profitability of taking on the new project.

Sunk Cost

A cost that has already been incurred and cannot be recovered, which should not influence future business decisions.