Use the Following Information for the Next 4 Questions

question 31

Multiple Choice

Use the following information for the next 4 questions.
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 labor at 30% and overhead is applied uniformly. The costs per equivalent unit are: direct material $1.00; direct labor $1.50; overhead $2.00.
-The cost of abnormal spoilage is

• A) $800
• B) $1,400
• C) $1,800
• D) $4,000

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Definitions:

Production Possibility

The combination of goods and services that can be produced given available resources and technology, illustrating the trade-offs in production.

Linear

Describes a relationship or function that represents a straight line when graphed, indicating a constant rate of change.

Positive Economics

The branch of economics that concerns the description and explanation of economic phenomena, focusing on facts and cause-and-effect relationships without making judgments.

Normative Economics

The branch of economic analysis that makes prescriptions about the way the economy should work.