Question

On-Road Wheels, Inc., manufactures a basic road bicycle. Production and sales data for the most recent year are as follows (no beginning inventory): Variable production costs Fixed production costs Variable selling and administrative costs Fixed selling and administrative costs Selling price Production Sales $100 per bike $400,000 $22 per bike $550,000 $200 per bike 20,000 bikes 18,000 bikes Your answer is correct. Prepare a brief income statement using absorption costing. ON-ROAD WHEELS, INC. Income Statement (Absorption Costing) Sales 2 Less 6): Cost of Goods Sold 0 Gross Profit/(Loss) Less : Selling and Administrative Costs Net Income /(Loss) 3600000 160000 i 1440000 946000 494000 $ e Textbook and Media Compute the amount to be reported for inventory in the year-end absorption costing balance sheet. Amount to be reported for inventory $

Answer 1

Number of units produced = 20,000

Number of units sold = 18,000

Ending inventory = Number of units produced - Number of units sold

= 20,000 - 18,000

= 2,000

Variable production cost (2,000 x 100)	200,000
Fixed production cost (400,000 x 2,000/20,000)	40,000
Ending inventory cost	$240,000

Hence, amount to be reported for inventory = $240,000

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