An Error Was Made by ROC Company in Computing the Percentage-Of-Completion

question 43

Multiple Choice

An error was made by ROC Company in computing the percentage-of-completion of the current year's ending Work-in-Process Inventory.The error resulted in the assignment of a lower percentage of completion to each component of the inventory than actually was the case.There was no beginning Work-in-Process Inventory.What is the effect of this error on (1) cost assigned to cost of goods completed for the period and (2) the computation of costs per equivalent unit?

• A)Understated;Understated
• B)Understated;Overstated
• C)Overstated;Understated
• D)Overstated;Overstated

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Definitions:

Internal Rate

Often related to the internal rate of return (IRR), it's a metric used in financial analysis to estimate the profitability of potential investments.

Time Value

The theory that money today is more valuable than the same quantity in the future, due to its potential to accumulate additional value.

Profitability Index

A financial tool that calculates the ratio between the present value of cash inflows and the present value of initial investment, often used in capital budgeting.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to analyze the profitability of an investment.