Archetype Fabrication Makes Pre-Stressed Concrete Forms for the Building Industry

question 146

Multiple Choice

Archetype Fabrication makes pre-stressed concrete forms for the building industry. They use just-in-time production and accounting methodology. At the beginning of January, selected account balances are shown in the T-accounts below. During January, the following 5 transactions take place:
1) Purchase $40,000 of materials on account.
2) Pay out $25,000 of direct labor costs.
3) Incur $9,000 of manufacturing overhead costs.
4) Complete 12 units. Each unit includes $1,500 of materials, $300 of direct labor, and $150 of manufacturing overhead costs.
5) Sell 10 of the 12 completed units at a price of $2,200.
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Use the T-accounts shown above to record the transactions, and then answer the following question:
After transaction number 4, what was the balance in the Raw and in-process inventory account?

• A) $24,000
• B) $22,000
• C) $15,000
• D) $25,000

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Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing the ownership interest in the company.

Vertical Analysis

An approach to financial statement examination where each component within the principal groups of accounts (assets, liabilities, and equity) on a balance sheet is shown as a ratio of the overall category amount.

Total Assets

The sum of all resources owned by an entity, measured in monetary terms, and represented on the balance sheet.

Accounts Receivable Turnover

A financial ratio indicating how quickly a company collects cash from credit sales by measuring the number of times receivables are collected over a period.