The Computation of Equivalent Units Under the FIFO Method

question 140

Multiple Choice

The computation of equivalent units under the FIFO method:

• A) treats units in the beginning work-in-process inventory as if they were started and completed during the current period.
• B) treats units in the beginning work-in-process inventory as if they represent a batch of goods separate and distinct from goods started and completed during the current period.
• C) treats units in the ending work-in-process inventory as if they were started and completed during the current period.
• D) ignores units in the beginning and ending work-in-process inventories.

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Definitions:

Product Cost Method

An accounting method used to assign costs to inventory and cost of goods sold, including direct materials, direct labor, and manufacturing overhead.

Differential Cost

The difference in total cost between two alternatives in making a business decision.

Differential Revenue

The difference in revenue generated from two different business actions or decisions, helping to assess the financial impact of each choice.

Contribution Margin

The difference between sales revenue and variable costs, used to cover fixed costs and to generate profit.