Inventory Valuation under Absorption Costing and Variable Costing At the end of

Question

Inventory Valuation under Absorption Costing and Variable Costing At the end of the first year of operations, 6,500 units remained in the finished goods Inventory. The unit manuflacturting costs during the year were as follows: Direct materiais Direct labor Fixed factory overhead Variable factory overhead Determine the cost of the finished goods inventory reported on the balance sheet Absorption costing Variable eing 35.40 6.90 under (a) the absorption costing concept and (b) the varilable costing concept. MacBook Air 888 ,a 4 5

Explanation / Answer

Calculate ending finished goods inventory under variable and absorption costing :

Variable Absorption Direct material 35.40 35.40 Direct labour 13.40 13.40 Variable factory overhead 6.10 6.10 Fixed factory overhead 6.90 Unit product cost 54.90 61.80 Ending finished goods inventory units 6500 6500 Ending finished goods inventory cost 356850 401700

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