Answer:
The correct answer is A that is Inventory management
Explanation:
Inventory management is the term which is related to the supervision of the non-capitalized assets which is inventory and the items of the stock. A supply chain management component, which is inventory management, supervises or look after the flow of goods from the makers or the manufacturers to the storage or warehouses.
So, the inventory management is the activity of the physical distribution which is vital in supervising the items which could lead to decrease in storage, shipping and other cost.
Assume that a family spends 35% of its income on housing, 20% on travel-related expenses, 10% on utilities, 25% on health care, and 5% on miscellaneous items. Demand for which category will be most responsive to a change in price?
Answer:
We need the slope of each category.
Explanation:
Having the amount of each category is not enough to find the responsive of each one of them to a change in their prices, we need a measure called elasticity, this indicator measures the responsive of a product to a change in its price.
Outstanding stock of the West Corporation included 40,000 shares of $5 par common stock and 20,000 shares of 5%, $10 par non-cumulative preferred stock. In 2013, Hall declared and paid dividends of $8,000. In 2014. Hall declared and paid dividends of $24,000. How much of the 2014 dividend was distributed to preferred shareholders?
a) $16.000.
b) $10.000
c) $12,000.
d) None of these answer choices are correct.
Answer:
b) $10.000
Explanation:
In order to find the total preferred stock dividend we need to have the rate of the dividend, the par value of the preferred stock and the number of preferred stocks. In this question we are given the rate of the dividend of preferred stock which is 5%, we are also given the par value of the preferred stock which is $10 and we are also given the total number of preferred stock which is 20,000.
To find out how much dividend was distributed to preferred shareholders we need to use the formula
Rate of dividend*par value of stock * number of preferred shares
0.05*10*20,000= 10,000
Castille Corp. purchases, for $600,000, land upon which a building and a dilapidated shed are situated. Castille plans to use the building as-is for operations but immediately razes the shed at a cost of $5,000 minus scrap recovery of $1,000. A recent tax appraisal of the property allocated $100,000 to the land and $400,000 to the building. In the entry to record the acquisition of the property,
at what amount will Castille debit Land?
a. $124,000
b. $120,800
c. $120,000
d. $100,000
Answer:
b. $120,800.00
Explanation:
Cost of the land $ 600,000/-
Associated expenses:
Razing down the shed: $ 5000
income from scrap: $ 1000
Total expenses $ 4000
The total cost of land =600,000+4000= $ 604,000
Tax allocation: land and building $ 500,000
land allocation will be: 100,000/500,000 x$ 604,000
=0.2x604,000
=$120,800.00
Information systems help achieve many important business objectives. When a manager does not receive forecasts, sales projections, or appropriate dashboards, the business objective of ______________ is not achieved.
Answer: Proper decision making
Explanation: Information is key factor when a business manager needs to make proper decisions.
The manager needs to get all the available charts, analysis, projections about a particular business to be taken. Poor information would increase the likelihood of business failure.
the traditional concept concerning employer or employees' free decision on termination in non unionized organizations is termed as_________________.
Answer:
Employment at will.
Explanation:
Answer:
Employment at will
Explanation:
IS a term used un the U.S,. labor law, for contractual relationships in wich an employee can be dismissed by an employer for any reason, and whitout warning, as long as the reason is not illegal.
At December 31, 2018 and 2019, Frist Company had outstanding 50 million common shares and 4 million shares of 10%, $10 par cumulative preferred stock. Net income for 2019 was $20 million. No dividends were declared in 2018 or 2019. EPS for 2019 was:
Answer:
The EPS for 2019 was $0.32
Explanation:
A Net Income $20,000,000
B No. of preferred Stock shares $4,000,000
C Par value per share $10.00
D = C*10% Dividend per share (10%) $1.00
E = B*D Preferred Dividend $4,000,000.00
F = A - E Net Income(Common Stockholders) $16,000,000.00
G Number of share(common stock)outstanding 50,000,000
H = F - G Earning per share for 2019 $0.32
Therefore,The EPS for 2019 was $0.32
Answer:
Eet
Explanation:
international trade, and changes in the aggregate price level.
a. Suppose that the MPC is equal to 0.75. What was the size of the change in government purchases of goods and services that resulted in the increase in real GDP of $200 million?
b. Now suppose that the change in government purchases of goods and services was $20 million. What value of the multiplier would result in an increase in real GDP of $200 million?
c. Given the value of the multiplier you calculated in part b, what marginal propensity to save would have?
Answer:
A) 50 millions
B) 10
C) 0.10
Explanation:
Government spending multiplier:
1/(1-MPC) = 1/MPS
1/(1-0.75) = 1/0.25 = 4
The government multiplier is 4 thus, to increase the GDP by 200 million the government spending should be of 50 millions as:
government spending x multiplier = increasein GDP
G x 4 = 200
G = 200/4 = 50
we are given with G and increase in GDP we should solve for multiplier:
government spending x multiplier = increasein GDP
20 x m = 200
m = 200 / 20 = 10
C) the multiplier is: 1/(1-MPC) = 1/MPS
if m = 10 then:
1/MPS = 10
MPS = 1/10 = 0.10
The size of the multiplier is determined by the proportion of the marginal dollar of income that goes into taxes, saving, and imports. The multiplier effect occurs when an initial increase in spending cycles repeatedly through the economy, having a larger impact than the initial dollar amount spent. To calculate the change in government purchases of goods and services required to increase real GDP by a certain amount, divide the desired increase in real GDP by the multiplier.
Explanation:The size of the multiplier is determined by the proportion of the marginal dollar of income that goes into taxes, saving, and imports. These factors are known as "leakages." The multiplier effect occurs when an initial increase in spending cycles repeatedly through the economy, having a larger impact than the initial dollar amount spent.
a. To calculate the change in government purchases of goods and services required to increase real GDP by $200 million, you need to divide the desired increase in real GDP by the multiplier. If the MPC is 0.75, the multiplier is 1/ (1 - MPC) = 1/ (1 - 0.75) = 1/0.25 = 4. So, the change in government purchases of goods and services would be $200 million divided by 4, which is $50 million.
b. In this case, you need to divide the desired increase in real GDP by the change in government purchases of goods and services to find the value of the multiplier. If the change in government purchases of goods and services is $20 million and the desired increase in real GDP is $200 million, the multiplier would be $200 million divided by $20 million, which is 10.
c. Given the value of the multiplier calculated in part b (which is 10), you can find the marginal propensity to save by subtracting it from 1. So, the marginal propensity to save would be 1 - 10, which is -9.
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A report indicated that the average real wage in manufacturing declined by 2 percent between 1990 and 2000. If the CPI equaled 1.30 in 1990, 1.69 in 2000, and the average nominal wage in manufacturing was $35 in 2000, what was the average nominal wage in manufacturing in 1990?
Final answer:
To find the average nominal wage in manufacturing in 1990, calculate the inflation-adjusted wage using the CPI. The average nominal wage in manufacturing in 1990 was approximately $35.
Explanation:
To find the average nominal wage in manufacturing in 1990, we need to calculate the inflation-adjusted wage using the Consumer Price Index (CPI). First, we can calculate the inflation rate by dividing the CPI in 2000 (1.69) by the CPI in 1990 (1.30). This gives us an inflation rate of approximately 1.3 (1.69 / 1.30).
Next, we can calculate the real wage in 2000 by multiplying the average nominal wage in 2000 ($35) by the inflation rate (1.3). This gives us a real wage of approximately $45.5 (35 * 1.3).
Finally, to find the average nominal wage in 1990, we need to adjust the real wage in 2000 for inflation. We divide the real wage in 2000 ($45.5) by the inflation rate (1.3). This gives us an average nominal wage in 1990 of approximately $35 (45.5 / 1.3).
During project executing, a team member comes to the project manager because he is not sure what work he needs to accomplish on the project. Which of the following documents contains detailed descriptions of work packages?A. WBS dictionaryB. Activity listC. Project scope statementD. Scope management plan
Answer:
The correct answer is A. WBS dictionary.
Explanation:
The WBS (work breakdown structure) or Work Decomposition Structure (WDS) provides a common reference framework for all project elements and for the estimation and programming of specific tasks within the project. time, resources and quality within the project plans.
A good work breakdown structure encourages a systematic planning process, reduces the possibility of omitting key elements of the project, and simplifies the project through its division into manageable units. It is a tool to follow the progress of the project.
If WBS is used as the common skeleton for programming and for estimation, communication between professionals working on the project will be facilitated.
A WBS is, or should be, a uniform, consistent and logical method of dividing a project into smaller, more manageable components for planning, estimation and control.
A WBS oriented to deliverables facilitates and encourages the exchange of information. Ideally, there should be some uniformity and consistency in the WBS. In order to achieve uniformity, "all children of the same father" must be developed on the basis of the same base.
The ultimate goal is to achieve a WBS that highlights a logical organization of products, components and modules.
The WBS Dictionary contains detailed descriptions of work packages, offering the needed clarification for a team member unsure of their project tasks. Option A
Explanation:The document that contains detailed descriptions of work packages in a project is the WBS Dictionary. The Work Breakdown Structure (WBS) Dictionary is designed to provide detailed information about each component in the Work Breakdown Structure, including work packages.
It includes detailed activities, deliverables, and timelines for each piece of the WBS. Therefore, when a team member is unsure about the specifics of the tasks they are required to perform, the WBS dictionary is the go-to document for clarification.
Other documents listed are important for project management, but the WBS dictionary specifically provides the level of detail about the work to be performed under each work package. The Activity List is generally a breakdown of the work packages into the individual activities required to complete them.
The Project Scope Statement provides an understanding of the project scope, including the major deliverables and project assumptions and constraints. The Scope Management Plan describes how the project scope will be defined, validated, and controlled. Option A
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Horseshoe Stables is losing significant market share and thus its managers have decided to decrease the firm's annual dividend. The last annual dividend was $0.90 a share but all future dividends will be decreased by 10 percent annually. What is a share of this stock worth today at a required return of 15 percent?
Answer:
$3.24
Explanation:
Data provided in the question:
Last annual dividend, D0 = $0.90
Growth rate, g = -10% = - 0.10 (negative sign means decrease)
Required return, r = 15% = 0.15
Now,
Future dividend, D1 = D0 × (1 + r)
= $0.9 × (1 + (-0.10) )
= $0.81
Current worth of the stock = $0.81 ÷ ( 0.15 - (-0.10) )
= $0.81 ÷ 0.25
= $3.24
A local barbecue joint makes one massive batch of potato salad each day. If they run out of this 37) savory side before the end of the day, their last few customers are less than satisfied, but if they make too much, they sell it to the local hog farmer for feed. Every serving costs an equivalent of $0.23 to make, but can be sold for $2.50 to customers and for $0.12 to the hog farmer. The average daily demand is for 400 servings with a standard deviation of 40 servings.How many servings should be made each day?A) 462
B) 455
C) 467
D) 453
Answer:
option (C) 467
Explanation:
Data provided in the question:
Every serving costs = $0.23
Selling cost to customer = $2.50
Selling cost to hog farmer = $0.12
Average daily demand, d = 400
Standard deviation, s = 40 servings
Now,
Cs = Selling price - Cost
= $2.50 - $0.23
= $2.27
Co = Cost - Discounted price
= $0.23 - $0.12
= $0.11
Service level = [tex]\frac{Cs}{Cs+Co}[/tex]
= [tex]\frac{\$2.27}{\$2.27+\$0.11}[/tex]
= 0.9537
For the service level of 0.9537, the z value from the standard z table = 1.68
Therefore,
Servings made each day = d + zs
= 400 + 1.68 × 40
= 467.2 ≈ 467
Hence,
The correct answer is option (C) 467
Through shared values, organizational cultures can informally do all the following EXCEPT:
a. determine how people are treated, controlled and rewarded.
b. eliminate politics in the workplace
c. establish how cooperation, competition, conflict and decision making are handled.
d. motivate the ethical actions and communications of managers and subordinates.
Answer:
B
Explanation:
Organizational culture includes an organization’s expectations, experiences, philosophy, as well as the values that guide member behavior, and is expressed in member self-image, inner workings, interactions with the outside world, and future expectations. Culture is based on shared attitudes, beliefs, customs, and written and unwritten rules that have been developed over time and are considered valid (The Business Dictionary).
Organizational culture has to do with the culture of the firm, hence, it cannot eliminate politics in the workplace.
"Coordinating fiscal policy," one of the five limits of fiscal policy, can be difficult because _____.
a. Economists often disagree about the meaning of certain statistics.
b. State and local government policies might interfere with the intended outcome of federal policies.
c. Government officials might take a long time to put these policies into effect.
d. Government spending changes must come from the limited funds of discretionary spending.
Answer:
The answer is letter B
Explanation:
Because State and local government policies might interfere with the intended outcome of federal policies.
Answer:
B: State and local government policies might interfere with the intended outcome of federal policies.
Conventional database technologies often choke when trying to sift through the massive amounts of data collected by many of today's firms, leading to the rise of Hadoop and other "Big Data" technologies. True False
Answer:
true
Explanation:
The Hadoop software developed by Apache Technologies is an open source software library that allows the processing of big data across computers using a programming model. It was designed to facilitate the handling of big data from single servers to thousands of computers.
Most companies cannot afford to invest millions in computer hardware in order to support all their big data, so they have use Hadoop or similar software to handle it (it is cheaper this way).
Changes in weather patterns are increasing administrative costs for insurance companies. These added costs often exceed the amount of the premiums coming in and claim payments going out. To address this problem, insurance companies typically
Answer:
buildup the amount of their reserves
Explanation:
Based on the information provided within this question it can be said that in order to address this problem, insurance companies typically buildup the amount of their reserves. By doing this the company's have a sort of "escape plan" allowing them to pay these excess costs that they would otherwise not be able to pay since it exceeds the amount that they are making.
A baseball fan with a Mike Trout baseball card wants to trade it for a Giancarlo Stanton baseball card, but everyone the fan knows who has a Stanton card doesn't want a Trout card. Economists characterize this problem as a failure of the:_________
Answer:
Principle of a double coincidence of wants.
Explanation:
The principle of a double coincidence of desires is the basis of an exchange economy. It occurs when two parties wish to exchange an item they each own without the exchange being made involving any monetary payment, so both parties need to be willing to agree to sell and buy each commodity. This economic phenomenon arises due to needs, desires or motivational situations for the exchange to take place in the same place and time.
Andre Company does not segregate sales and sales taxes when it charges customers at the register. Its register total for a given day is $5,724, which includes a 6% sales taxes. How much should be recognized as sales revenue and sales taxes payable, respectively?
a. $5,000 and $724
b. $5,437.80 and $286.20
c. $5,381 and $343
d. $5,400 and $324
e. $5,724 and $0
Answer:C- $5,381 and $343
Explanation:
Andre Company had sales of $5,724 which has a 6% sales tax included in the sales.
Therefore we need to calculate what the sales tax component in the sales figure is. It is calculated thus:
Total sales including tax = $5, 724
Sales tax charged is 6%
Therefore actual sales = $5,724 * 6%
Equals $343
Adjusted sales is $5,724-$343= $5,381.
Adjusted Sales figure is $5,381
Tax on sales is $343
The correct amounts to be recognized are $5,400 as sales revenue and $324 as sales taxes payable, which corresponds to option d. This is determined by dividing the total register amount by 1.06 to separate the taxable sales from the included 6% sales tax.
The student is asked to calculate the amounts that should be recognized as sales revenue and sales taxes payable when the total register amount includes sales tax. The total amount collected is $5,724, which includes a 6% sales tax.
To find the sales revenue and the sales taxes payable, we first need to separate the total amount into the taxable sales and the sales tax itself. To do this, we'll use the following formula where t is the total amount collected, r is the sales revenue, and s is the sales tax rate:
r + (r × s) = t
Let's convert the sales tax rate to decimal form (6% = 0.06) and rearrange the equation to solve for r:
r (1 + s) = t
r (1 + 0.06) = $5,724
r = $5,724 / 1.06
r = $5,400
Now, the sales tax amount can be determined by subtracting the sales revenue from the total amount collected:
Sales taxes payable = t - r
Sales taxes payable = $5,724 - $5,400
Sales taxes payable = $324
So the correct answer is that the sales revenue is $5,400 and the sales taxes payable is $324. This corresponds to option d.
aroline Watts is an employee of Lavender Creek Farm. She has come to you, the payroll accountant, for advice about her health insurance premiums, specifically if she should have them deducted pre-tax or post-tax. Required: What reason(s) would you give her for having the medical premiums deducted on a pre-tax basis?
Answer:
If Aroline decides to deduct her medical premiums on a pre-tax basis then she will save money since she will have a lower gross income subject to federal or state income taxes, and FICA taxes (social security and medicare).
If her gross income lowers, the taxes she pays will also be lower.
Steven, a construction worker, tends to buy a new gadget if most of his friends have them and only after they've teased him about not having the gadget yet. He relies on reviews from his friends rather than on television or newspaper advertisements to make his purchase decisions. It can be inferred that when it comes to the diffusion of innovation, Steven belongs to the group of _____.
a. innovatorsb. early majorityc. late majorityd. early adopters
Answer: late majority
Explanation: In simple words, it refers to the group of people who are last to accept a new technology or product that comes to the market.
These are the group of individuals who remains satisfied with their existing level of technical knowledge and utility and are resistant to any change with respect to it.
In the given case, Steven adopted for new gadget only when his friends pressurized him to do so. Thus, we can conclude that Steve belongs to the group of late majority.
In order for a firm to engage in price discrimination, it must be Select the correct answer below:
a) Able to separate consumers into different groups based on demand elasticities
b) A price taker Experiencing economies of scale in the relevant range of production
c) Producing in the inelastic portion of its demand curve to raise its price and increase total revenue
Answer:
a) Able to separate consumers into different groups based on demand elasticities
Explanation:
A firm is able to practice the price discrimination when following conditions are fulfilled:
- The firm should have market power and must be a price maker.
- The firm must be able to differentiate its customer base into different groups based on their demand elasticity.
- The firm is able to stop the cross selling between different groups of customers that are charged different prices.
Therefore, For firm to engage to price discrimination, it must be able to separate consumers into different groups based on their demand elasticities.
After analyzing the data on cab services in Lucitona, the Transport Authority of Lucitona discovered that there was an 85 percent increase in the number of people using cab services on rainy days. In the context of data mining, the Transport Authority of Lucitona discovered a(n) _____.
a. affinity pattern
b. data cluster pattern
c. sequential pattern
d. extrapolative pattern
Answer:
A) affinity pattern
Explanation:
Affinity patterns show associations that occur among objects in the real world. These objects that show affinity patterns or association patterns are not complementary to each other and sometimes may not even be related to each other.
In this case, the fact that it is raining is probably what causes the 85% in cab service usage. If we analyze them separately, cab service and rain have nothing to do with each other, but when it rains more cabs are used.
Which of the following is the international coordinator of regulatory policy for the world and makes short-term loans to member countries with deficits and provides foreign currencies to its members?a. World Trade Organizationb. International Monetary Fund
c. World Bank
d. United Nations
e. Multinational corporation
Answer:
World Bank
Explanation:
One of the core objectives of the world bank is to bridge the gap between rich and poor countries. They achieve this by providing short term loans to member countries with deficit.
Marketing manager Ricki Stephens reviewed her marketing information system to learn who was buying her company's products and at what stores they were buying. She found this internal and external data in her company's ________.
A.data warehouse.
B. big data set.
C. market research network.
D. annual report.
E. focus group
Answer:
Letter A is correct. Data warehouse.
Explanation:
Data warehouse acts as a digital data warehouse of the company, whose main purpose is to store relevant information about the organization so that through history it can provide reports that help the company in the decision making process according to the facts found.
The biggest benefits found in the database system are greater flexibility and control of information and research, and the creation of standards that correct data and coordinate and optimize system data to ensure greater effectiveness.
Suppose during the course of a year an economy produces $7 trillion of consumer goods, $1 trillion of investment goods, $5 trillion in government services, and has $1 trillion of exports and $2 trillion of imports. For that economy, GDP would be: A)$16 trillion. B) $14 trillion. C) $13 trillion. D) $12 trillion.
Answer:
D) $12 trillion.
Explanation:
GDP is the sum of all final goods and services produced in an economy within a given period which is usually a year.
GDP = Consumption + Investment + Government Spending + Net Export
Net Export = Export - Import
Net Export = $1 - $2 = -$1
GDP = $7 + $1 + $5 - $1 = $12
All calculations are in trillion
I hope my answer helps you.
The United States Navy purchases uniforms from a single supplier. For the last twenty-five years, the trousers purchased from this supplier have not changed and have been bought every six months, in seven different sizes. This example is called aA. new-product purchaseB. repetitive purchaseC. straight rebuyD. modified rebuyE. standard order
Answer:
C. straight rebuy
Explanation:
Straight rebuy -
It is the method , when the customer purchases another identical goods in the same amount with the same terms and condition , from the very same supplier , is known as straight rebuy .
Hence , from the question ,
The United States Navy buys uniform from the same supplier for the last 25 years .
Therefore ,
the information given in the question is about straight rebuy .
The Isberg Company just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 5.50% per year in the future. The company's beta is 1.15, the market risk premium is 5.00%, and the risk-free rate is 4.00%. What is the company's current stock price, P0? a. $18.62 b. $19.08 c. $19.56 d. $20.05 e. $20.55
Answer:
option (a) $18.62
Explanation:
Data provided in the question:
Dividend just paid, D0 = $0.75
Expected growth rate, g = 5.50%
Company's beta = 1.15
Market risk premium, Rm = 5.00%
Risk-free rate, Rf = 4.00%
Now,
D1 = D0 × ( 1 + g)
= $0.75 × ( 1 + 5.5% )
= $0.79125
Required rate of return = Rf + ( beta × Rm )
= 4.00% + ( 1.15 × 5.00% )
= 4.00% + 5.75%
= 9.75%
Also,
Stock price = D1 × ( R - g )
therefore,
Current stock price = $0.79125 ÷ (9.75% - 5.50%)
= $0.79125 ÷ 0.0425
= $18.617 ≈ $18.62
Hence,
The correct answer is option (a) $18.62
_______________ is an explanation of the process by which firms acquire and retain one or more value-chain activities inside the firm, minimizing the disadvantages of dealing with external partners and allowing for greater control over foreign operations.
Answer:
Internalization theory
Explanation:
Developed in 1976 by Buckley and Cassom and Rugman in 1979, the theory of internalization is premised on the assumption that companies perform the operating processes performed by the market less efficiently internally, that is, each company has a set of specific factors that assist in gaining competitiveness.
The process of corporate internationalization occurs when the company internationalizes its operations across borders.
There are two fundamental principles that underpin the theory of internalization:
The benefits of market internalization must outweigh the costs. The transaction costs of internalization operations should be higher than the costs of their organizational integration.Identify the purpose of antitrust legislation.
Answer and Explanation:
Antitrust laws are referred to as the laws which tend to advocate, protect and also advertise competition, i.e. the competitive transformation in the definite line of the commerce i.e. the well defined markets. This most commonly is known to be the sole purpose of the antitrust legislation. These legislation are known not to penalize the big organizations based on the detail of the size.
The marginal revenue received by a firm in a perfectly competitive market:____a.is greater than the market price.b.is less than the market price.c.is equal to its average revenue.d.increases with the quantity of output sold.
Answer:
C. Is equal to its average revenue.
The marginal revenue received by a firm in a perfectly competitive market is equal to its average revenue, which means it is always equal to the market price, reflecting the characteristic of firms in such markets as price takers.
Explanation:The marginal revenue received by a firm in a perfectly competitive market is equal to its average revenue. In a perfectly competitive market, the price of the product does not change with the production of an additional unit. Therefore, marginal revenue, which is the additional revenue gained by producing one more unit, is calculated by dividing the change in total revenue by the change in output quantity,
Therefore, marginal revenue for a perfectly competitive firm is always equal to the market price and does not vary with the quantity of output sold. This scenario helps in understanding how perfect competition works, where firms are price takers, meaning they accept the market price determined by the supply and demand forces.
In a process costing system, the calculation of equivalent units is used for calculating the dollar amount of ending inventory the dollar amount of the cost of goods sold for the accounting period the dollar cost of a particular job Both A and B are correct
Answer:
calculating the dollar amount of ending inventorythe dollar amount of the cost of goods sold for the accounting periodExplanation:
The calculation of equivalent units main purpose is to convert partially completed units that are still in production, into completed units according to the amount that could be produced using the same amount of inputs.
Once you calculated the equivalent units, you can assign a value to your ending inventory including both finished units and equivalent units. By doing this you can calculate the cost per unit and the COGS for the accounting period.
In a process costing system, equivalent units are used to allocate costs of a specific period over all units produced during that period, crucial for evaluating stock and cost of goods sold. 'Equivalent units' refers to fully completed units equivalent to the work done during a period, for fair cost distribution.
Explanation:In a process costing system, the calculation of equivalent units is used to determine the dollar amount of both the ending inventory and the cost of goods sold for an accounting period. The term 'equivalent units' refers to the amount of work done during a period, expressed in fully completed units. This concept helps to allocate the costs of an accounting period fairly over all units worked on during that period.
For example, if a factory produces 1000 units in a period, but 200 are only 50% complete at the end of the period, we would say there are 900 equivalent units. The costs of the accounting period would then be spread across these 900 units. Therefore, the calculation of equivalent units aids in evaluating the ending inventory and cost of goods sold in a process costing system.
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