Kelly Ltd Uses a Weighted-Average Process Costing System That Calculates

question 1

Multiple Choice

Kelly Ltd uses a weighted-average process costing system that calculates normal rework as 2% of the units passing inspection. The inspection point is at the 75% point and units failing inspection are returned to the 40% point. During the current period, 50,000 units were started; 62,000 units inspected; and 52,000 units completed. Direct material is added at the 50% point and conversion costs occur uniformly. Beginning work in process was 10,000 units, 55% complete and ending work in process was 8,000 units, 85% complete. Costs per equivalent unit for material were $1.00 and $3.00 for conversion costs. The loss from abnormal rework was

• A) $3,200
• B) $1,640
• C) $1,120
• D) $4,018

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Definitions:

Accumulation

The process of gradually gathering or increasing amounts of something over time.

Inventory

The stock of goods or materials that a business holds at any given time, including raw materials, work-in-process, and finished goods.

Vendor-Managed Inventory

A replenishment strategy where the supplier is responsible for maintaining the inventory levels of their products at the customer's location.

Outsourcing

The business practice of hiring external vendors to perform services or produce goods that were previously handled internally, often to reduce costs or focus on core competencies.