A business operated at 100% of capacity during its first month and incurred the

Question

A business operated at 100% of capacity during its first month and incurred the following costs:

If 1,900 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the absorption costing balance sheet?

Production costs (18,000 units): ??? Direct materials $172,700 ??? Direct labor 222,100 ??? Variable factory overhead 252,200 ??? Fixed factory overhead 95,500 $742,500 Operating expenses: ??? Variable operating expenses $130,500 ??? Fixed operating expenses 47,100 177,600

Explanation / Answer

Unit product cost under absorption costing = 742500/18000 = 41.25 per unit

Amount of ending inventory under absorption costing = 1900*41.25 = 78375

so answer is a) $78375

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