CPA LEVEL I Financial Accounting & Reporting (FAR) PRACTICE EXAM Q & A 2026 (Complete And Verified Study material) (18pages) LEARNEXAMS

1. ABC Inc. is a manufacturing company that uses the

weighted-average method of process costing. In January,

the company started production of 10,000 units and

completed 8,000 units by the end of the month. The ending

work in process inventory was 40% complete with respect

to direct materials and 20% complete with respect to

conversion costs. The total costs incurred during January

were $120,000 for direct materials and $80,000 for

conversion costs. What is the cost per equivalent unit for

direct materials and conversion costs, respectively?

A) $12 and $8

B) $12 and $10

C) $15 and $10*

D) $15 and $12

Rationale: The equivalent units for direct materials are

9,200 (8,000 + 0.4 x 2,000) and the equivalent units for

conversion costs are 8,400 (8,000 + 0.2 x 2,000). The cost

per equivalent unit for direct materials is $120,000 / 9,200

= $15 and the cost per equivalent unit for conversion costs

is $80,000 / 8,400 = $10.

2. XYZ Ltd. is a retailer that uses the perpetual inventory

system and the gross method of recording purchases. On

January 1, XYZ purchased 100 units of inventory from a

supplier for $50 per unit, with terms of 2/10, n/30. On

January 5, XYZ returned 10 units to the supplier due to

defects. On January 9, XYZ paid the supplier in full. What

is the amount of purchase discounts that XYZ should