Crasper & Bros, Inc. manufactures phone cases for both Androids and iPhones. Last year, Crasper manufactured 34,060 units and sold 28,600 phone cases (units). They have reported the following Production costs for the year:
Direct materials | $ | 255,450 | |
Direct labor | $ | 173,706 | |
Variable manufacturing overhead | $ | 269,074 | |
Fixed manufacturing overhead | $ | 510,900 | |
Sales of their phone cases totaled $1,172,600 for the year, variable selling and administrative expenses totaled $148,720, and fixed selling and administrative expenses totaled $214,578. Since they are a brand new company, there was no beginning inventory. Assume that the direct labor cost is a variable cost.
Using the absorption costing, the ending inventory for the year would be valued at:
Multiple Choice
$263,830
$255,330
$193,830
$221,330
Answer: $193,830
Unit Product Cost Under Absorption Costing
Direct Material | 255,450 |
Direct Labor | 173,706 |
Variable MOH | 269,074 |
Fixed MOH | 510,900 |
Total Product Cost for 34,060 Units | 1,209,103 |
Units Product Cost =1209,130/34,060 | $35.50 |
Ending inventory in Units = Prodcued -Sold =34,060-28,600 = 5,460
Ending inventory in dollars =Ending Units * Product Cost = 5,460*35.50= $193,830(Answer)
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