Question

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (19,900 units): Direct materials $172,700 Direct labor 221,400 Variable factory overhead 265,400 Fixed factory overhead 92,800 $752,300 Operating expenses: Variable operating expenses $134,100 Fixed operating expenses 43,700 177,800 If 1,500 units remain unsold at the end of the month, the amount of inventory that would be reported on the absorption costing balance sheet is

Answer 1

Answer:

Ending inventory cost= $56,700

Step-by-step explanation:

Giving the following information:

Production costs (19,900 units):

Direct materials $172,700

Direct labor 221,400

Variable factory overhead 265,400

Fixed factory overhead 92,800

Total= $752,300

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

Total unitary production cost= 752,300/19,900= $37.80

Units in ending inventory= 1,500

Ending inventory cost= 1,500*37.8

Ending inventory cost= $56,700