An Entity Starts Production of a New Product and After

question 8

Multiple Choice

An entity starts production of a new product and after selling 2,000 units has closing inventory of 5,000 units.Normal operating capacity is 8000 units.Direct material costs are €3 per unit,direct labour costs are €2 per unit & variable overhead is €1 per unit.Fixed production overhead is €40,000,sales overhead is €30,000 & general overhead is €20,000.What is the value of closing inventory under IAS 2?

• A)€72,860
• B)€67,500
• C)€58,571
• D)€55,000

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Definitions:

Parallel Paths

In electrical circuits, parallel paths refer to configuration where components are connected alongside each other, leading to multiple pathways for current to flow, thus reducing the total resistance of the circuit.

Combination Circuit

A circuit that contains both series and parallel paths.

Series Components

Electrical components connected in a circuit in such a manner that there is only one path for current flow, causing the current through each component to be the same.

Parallel Components

Elements in an electrical circuit are said to be in parallel if they are connected across the same two points in the circuit, allowing electric current to split and flow through multiple paths.