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

question 31

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 Finished goods inventory account?

• A) $28,600
• B) $18,600
• C) $23,400
• D) $26,900

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Definitions:

Inventory Turnover

A ratio showing how many times a company's inventory is sold and replaced over a period, indicating the efficiency of inventory management.

Cost of Merchandise Sold

The total cost incurred to purchase or produce the goods that have been sold to customers during a period.

Excess Inventory

Inventory levels exceeding the demand, leading to increased storage costs and potential obsolescence.

Operations Improvement

Operations improvement involves strategies and actions aimed at boosting the efficiency, productivity, and overall performance of the operational aspects of a business.