Question

At the end of the first year of operations, 24,500 units remained in the finished goods inventory. The unit manufacturing costs during the year were as follows:

Direct materials	$23
Direct labor	27
Fixed factory overhead	15
Variable factory overhead	7

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the question below.

Open spreadsheet

Determine the cost of the finished goods inventory reported on the balance sheet under (a) the absorption costing concept and (b) the variable costing concept.

a. Cost of the finished goods inventory under the absorption costing:	$
b. Cost of the finished goods inventory under the variable costing:	$

Answer 1

	Absorption costing	Variable costing
Direct materials	23	23
Direct labor	27	27
Fixed factory overhead	15	0
Variable factory overhead	7	7
Unit Product cost	72	57
a. Cost of the finished goods inventory under the absorption costing:	1764000	=24500*72
b. Cost of the finished goods inventory under the variable costing:	1396500	=24500*57