Question

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

Production costs (17,200 units):

Direct materials $179,300

Direct labor 235,500

Variable factory overhead 263,400

Fixed factory overhead 100,100 $778,300

Operating expenses:

Variable operating expenses $122,900

Fixed operating expenses 48,000 170,900

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

a.$88,494

b.$85,956

c.$104,853

d.$74,917

Answer 1

Answer- If 1900 units remain unsold at the end of the month, the amount of inventory that would be reported on the absorption costing balance sheet is =Ending inventory*Unit product cost per unit

= 1900 units*$45.25 per unit

= $85975

Explanation- Unit product cost under Absorption costing:-Direct materials + Direct Labor+ Variable manufacturing overhead + fixed manufacturing overhead

=($179300+$235500+$263400+$100100)/17200 units

= $778300/17200 units

= $45.25 per unit