Answer the Following Questions Using the Information Below

question 122

Multiple Choice

Answer the following questions using the information below:
The Swivel Chair Company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 145,000 chairs. During the month, the firm completed 175,000 chairs and transferred them to the Finishing Department. The firm ended the month with 18,000 chairs in ending inventory. All direct materials costs are added at the beginning of the production cycle. Weighted-average costing is used by Swivel.
-How many chairs were in inventory at the beginning of the month? Conversion costs are incurred uniformly over the production cycle.

• A) 8,000 chairs
• B) 18,000 chairs
• C) 38,000 chairs
• D) 48,000 chairs

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Definitions:

Variable Expenses

Costs that vary directly and proportionately with changes in production volume or business activity.

Fixed

Refers to an interest rate or investment that remains constant and does not fluctuate over a specified period.

Operating Leverage

This is a measure of how revenue growth translates into growth in operating income, showing the proportion of fixed costs in a company's cost structure.

Financial Leverage

Financial leverage refers to the use of borrowed funds to increase the potential return on investment, amplifying both potential gains and losses.