A Firm Purchased 25 Units of Materials with a Unit

question 26

Multiple Choice

A firm purchased 25 units of materials with a unit price of $2.00 on May 5. On May 15, the firm purchased 25 units with a unit price of $2.10. If the firm uses the LIFO method of inventory pricing, the total cost of 30 units issued on May 20 would be

• A) $62.50.
• B) $60.00.
• C) $63.00.
• D) $60.50. (25 x 2.10) + (5 x 2) = 62.50.

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Definitions:

Finished Goods Inventory

Inventory of finished goods available for sale.

Standard Costs

Predetermined costs used for product costing, budgeting, and measuring performance, usually reflecting ideal expenses under normal conditions.

Work in Process

Goods in various stages of production within a factory, not yet completed but also not raw materials.

Fixed Manufacturing Overhead

The costs associated with production that do not change with the level of output, such as depreciation of equipment and salary of the factory manager.