A Company Starts Work on 1000 Physical Units and Completes

question 17

Multiple Choice

A company starts work on 1000 physical units and completes 75 per cent of conversion activity. The costs are $1500 for conversion and $5000 for direct material. What is the cost per equivalent unit for conversion?

• A) $1.00 per unit
• B) $1.50 per unit
• C) $2.50 per unit
• D) $2.00 per unit

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Definitions:

Inventory

The raw materials, work-in-progress products, and finished goods that a company holds for the purpose of sale in the near future.

Costs Of Goods Sold

Direct costs attributable to the production of the goods sold by a company, including materials and labor.

IFRS

Stands for International Financial Reporting Standards, which are a set of accounting rules used by companies to maintain their financial statements globally, fostering transparency and comparability.

Direct Method

A cash flow statement preparation approach that separately lists major classes of gross cash receipts and payments.