Richards Corporation Uses the FIFO Method of Process Costing

question 7

Multiple Choice

Richards Corporation uses the FIFO method of process costing.The following information is available for October in its Fabricating Department: Units:
Beginning Inventory: 80,000 units,60% complete as to materials and 20% complete as to conversion.
Units started and completed: 250,000.
Units completed and transferred out: 330,000.
Ending Inventory: 30,000 units,40% complete as to materials and 10% complete as to conversion.
Costs:
Costs in beginning Work in Process - Direct Materials: $37,200.
Costs in beginning Work in Process - Conversion: $79,700.
Costs incurred in October - Direct Materials: $646,800.
Costs incurred in October - Conversion: $919,300.
-Calculate the cost per equivalent unit of materials.

• A)$2.59
• B)$2.33
• C)$1.89
• D)$2.20
• E)$2.00

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Definitions:

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, typically illustrated as the area above the supply curve and below the market price.

Price Ceiling

A legally imposed limit on how high a price for a good, service, or commodity can be charged.

Market Supply Curve

A graphical representation that shows the relationship between the price of a good and the total output of the good all suppliers are willing and able to produce, holding other factors constant.