CH 6 (Part II) 1. In its first operating quarter a company has incurred the foll

Question

CH 6 (Part II) 1. In its first operating quarter a company has incurred the following Raw materials purchased Direct labor Variable factory overhead Fixed factory overhead Variable selling and administrative Fixed selling and administrative Sales (8,000 units) Gross margin Ending inventories $210,000 S355,000 S165,000 $21,000 S32,000 $1,000,000 $304,000 RM WIP FG S30,000 NONE 2,000 units How much fixed overhead cost is included in ending finished goods inventory under absorption costing? A. $34,000 B. $21,500 C. $800 D. $18,000 E. None of the Above

Explanation / Answer

Cost of goods sold = Sales-gross margin = 1000000-304000 = 696000 Total cost of goods manufactured = 696000/8000*10000=870000 Fixed manufacturing overhead = 870000-(210000-30000)-355000-165000= 170000 Fixed manufacturing overhead in ending inventory = 170000/10000*2000 = 34000 Option A is correct

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