The Table Shows the Quantity of Gold Bars (Qb) in Thousands

question 271

Multiple Choice

The table shows the quantity of gold bars (Qb) in thousands, the extraction cost for each thousand bars (in millions of dollars) , and the user cost of each thousand bars (in millions of dollars) facing the OZ Mining Company this year.Suppose that a new government regulation is going to shut down OZ's mining operation one year from now.Assuming that all gold extracted is sold in the same year (cannot be stockpiled for later sale) , how will the regulation affect
The user cost?

• A)It will have no effect on the user cost.
• B)The effect on the user cost cannot be determined.
• C)The user cost will rise because the rate of extraction will rise.
• D)The user cost will become zero because they will not be able to extract in the future.

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Definitions:

Equivalent Unit

A measure used in cost accounting to express the amount of work in progress inventory in terms of completed units.

Process Costing

A costing method used in industries where production is continuous, and costs are allocated to masses of similar units to compute an average cost per unit.

Conversion Costs

Expenses incurred in the process of converting raw materials into finished goods, typically including labor and overhead.

Welding Department

A specialized department within manufacturing focused on joining materials together using welding techniques to produce finished goods or parts.