Summit Manufacturing produces snow shovels. The selling price per snow shovel is

Question

Summit Manufacturing produces snow shovels. The selling price per snow shovel is $30. There is no beginning inventory.

In addition, the company has fixed selling and administrative costs of $160,000 per year.

EXERCISE 5-11. [LO 1] During the year, Summit produces 50,000 snow shovels and sells 45,000 snow shovels.

REQUIRED

What is the value of ending inventory using full costing?

Costs involved in production are: Direct material $ 5 Direct labor 4 Variable manufacturing overhead 3 Total variable manufacturing costs per unit $ 12 Fixed manufacturing overhead per year $180,000

Explanation / Answer

Calculate value of ending inventory under full costing method :

Direct material per unit 5 Direct labour per unit 4 Variable manufacturing overhead per unit 3 Fixed manufacturing overhead cost per unit (180000/50000) 3.6 Total manufacturing cost per unit 15.6 Ending inventory unit 5000 Value of ending inventory 78000

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