Wakefield Company Uses a Perpetual Inventory System

question 54

Multiple Choice

Wakefield Company uses a perpetual inventory system. In August, it sold 2,000 units from its LIFO-base inventory, which had originally cost $35 per unit. The replacement cost is expected to be $45 per unit. The company is planning to reduce its inventory and expects to replace only 1,500 of these units by December 31, the end of its fiscal year. The company replaced 1,500 units in November at an actual cost of $50 per unit.
Based on the preceding information, in the entry to record the replacement of the 1,500 units in November, Accounts Payable will be credited for:

• A) $67,500.
• B) $75,000.
• C) $62,500.
• D) $60,000.

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Definitions:

Average Total Cost

The total cost per unit of output, calculated by dividing the total cost of production by the number of units produced.

Total Cost

The complete cost of production including fixed and variable costs.

Average Total Cost

The total of all costs divided by the number of goods produced, representing the per unit production cost.

Output

The total amount of goods or services produced by an individual, company, or country.