Question

At Exodus Inc., 40,000 units are produced and 30,000 units are sold for a total of...

At Exodus Inc., 40,000 units are produced and 30,000 units are sold for a total of $720,000 in the first year of operations, resulting in operating income of $240,000. Fixed manufacturing costs are $120,000 and administrative costs are $80,000. Given this, the cost of the ending finished goods inventory under the absorption costing approach is

Select one:

a. $80,000.

b. not able to be determined from the provided information.

c. $ 70,000.

d. $110,000.

e. $90,000.

f. $100,000.

g. $120,000.

Business   Accounting   
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Homework Answers

Answer #1

OPTION - F. $100,000.

Sales - Gross Profit = Manufacturing Cost.

Gross Profit = Operating Income + Fixed Mfg cost + Administrative cost.

GP = $240000 + 120,000 + 80,000 = $440,000.

Manufacturing Cost = Sales - Gross Profit =>$720000-440000 = $280000.

Total Cost = Mfg cost + Fixed Overhead = $280,000 + 120,000 = $400,000.

Cost Per Unit = $400,000/40000 = $10.

Ending Inventory = Units Produced- Units Sold = 40000-30000 =10,000 Units.

Ending Inventory = 10,000 Units * $10 = $100,000.

Mfg cost = Direct Material + Labor + Variable Mfg Overhead.

If you have any doubts please comment on the answer.

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