Question

Krepps Corporation produces a single product. Last year, Krepps manufactured 34,930 units and sold 29,900 units....

Krepps Corporation produces a single product. Last year, Krepps manufactured 34,930 units and sold 29,900 units. Production costs for the year were as follows:

Direct materials $ 265,468
Direct labor $ 171,157
Variable manufacturing overhead $ 300,398
Fixed manufacturing overhead $ 454,090

Sales totaled $1,330,550 for the year, variable selling and administrative expenses totaled $170,430, and fixed selling and administrative expenses totaled $261,975. There was no beginning inventory. Assume that direct labor is a variable cost.

Under absorption costing, the ending inventory for the year would be valued at:

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Answer #1

Units in ending inventory = Beginning inventory + Units manufactured - Units sold

= 0 + 34,930 - 29,900

= 5,030 units

Unit Product cost = (Direct materials + Direct labor + Variable manufacturing cost + Fixed manufacturing cost) / Units manufactured

= ($265,468 + $171,157 + $300,398 + $454,090) / 34,930 units

= $1,191,113 / 34,930 units

= $34.10

Ending inventory for the year would be valued = Units in ending inventory * Unit Product cost

= 5,030 * $34.10

= $171,523

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