Why May the Number of Equivalent Units in Work in Process

question 26

Multiple Choice

Why may the number of equivalent units in Work in Process inventory differ for material and for conversion costs?

• A)A mistake was made in counting or recording the inventory amounts.
• B)Material and conversion costs enter the production process at different times and at different rates.
• C)Conversion costs are calculated at the end of the accounting period.
• D)Some units may have been transferred in from previous departments.

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Definitions:

Differential Effect

It is the financial impact of a business decision that differentiates between alternative choices, highlighting the relative costs or benefits.

Book Value

The net value of a company's assets minus its liabilities, as recorded on the balance sheet, often used to calculate the value of a company if it were to be liquidated.

Opportunity Cost

The price paid when one opts not to pursue the next most favorable choice during decision-making.

Cash Outlay

The actual amount of money spent or disbursed on goods, services, or assets.