Sparky Corporation Uses the FIFO Method of Process Costing

question 112

Multiple Choice

Sparky Corporation uses the FIFO method of process costing.The following information is available for February in its Molding Department: Units:
Beginning Inventory: 25,000 units,100% complete as to materials and 55% complete as to conversion.
Units started and completed: 110,000.
Units completed and transferred out: 135,000.
Ending Inventory: 30,000 units,100% complete as to materials and 30% complete as to conversion.
Costs:
Costs in beginning Work in Process - Direct Materials: $43,000.
Costs in beginning Work in Process - Conversion: $48,850.
Costs incurred in February - Direct Materials: $287,000.
Costs incurred in February - Conversion: $599,150.
-Calculate the cost per equivalent unit of materials.

• A)$2.00
• B)$2.05
• C)$1.74
• D)$2.36
• E)$2.61

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Definitions:

Marginal Product

The additional output that results from using one more unit of a variable input, holding all other inputs constant.

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot increase proportionally.

Total Product Curve

A graphical representation showing how the total quantity of output changes with variation in the quantity of a single input, holding other inputs constant.

Marginal Returns

The additional output gained by adding one more unit of input, holding all other inputs constant.