Use the Following Data from a Company Using a Process

question 15

Multiple Choice

Use the following data from a company using a process costing system to answer the question(s) below. Beginning Work in Process Inventory on June 1 :
1,000 units - 100 percent complete as to direct materials 80 percent complete as to conversion costs

Units Started During June:
6,500 units

Ending Work in Pracess Inventory on June 30: 1,200 units - 100 percent complete as to direct materials 40 percent complete as to conversion costs The FIFO process costing method is used by the company.
Equivalent units for conversion costs during the month totaled

• A) 8,020.
• B) 7,780.
• C) 6,980.
• D) 5,980.

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Definitions:

Current Ratio

Current assets/current liabilities. Measures the ability of the firm to pay off its current liabilities by liquidating current assets.

Acid Test

A stringent test that measures the liquidity of a company by calculating its quick assets (excluding inventory) against its current liabilities.

ROA

Return on Assets represents a financial metric that measures a company's profitability in relation to its overall assets.

Capital Structure

The mix of different forms of external funds used by a firm to finance its activities, including debt and equity.