A Company Uses the Weighted Average Method for Inventory Costing

question 171

Multiple Choice

A company uses the weighted average method for inventory costing. At the start of a period the production department had 20,000 units in beginning Work in Process inventory which were 40% complete; the department completed and transferred 165,000 units. At the end of the period, 22,000 units were in the ending Work in Process inventory and are 75% complete. The production department had conversion costs in the beginning goods is process inventory of $99,000 and total conversion costs added during the period are $726,825. Compute the conversion cost per equivalent unit.

• A) $4.76.
• B) $4.40.
• C) $4.19.
• D) $4.61.
• E) $4.55.

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Definitions:

Basic Earning Power

An indicator of a company's profitability from operations, expressed as EBIT (Earnings Before Interest and Taxes) divided by total assets.

Total Assets

The sum of all current and non-current assets owned by an entity as reported on the balance sheet.

EBIT

Earnings Before Interest and Taxes; a measure of a firm's profit that includes all expenses except interest and income tax expenses.

Debt/Assets Ratio

A financial ratio that indicates the proportion of a company's assets that are financed by debt.