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DanielleCPA
DanielleCPA, Certified Public Accountant (CPA)
Category: Finance
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At the end of the first year of operations, 5,200 units remained

Customer Question

At the end of the first year of operations, 5,200 units remained in the finished goods inventory. The unit manufacturing costs during the year were as follows:

Direct materials $35.00
Direct labor 16.80
Fixed factory overhead 5.60
Variable factory overhead 4.90

Determine the costs of the finished goods inventory reported on the balance sheet under
(a) the absorption costing concept and (b) the variable costing concept.
Submitted: 5 years ago.
Category: Finance
Expert:  DanielleCPA replied 5 years ago.

Hi and welcome to Just Answer! I'm happy to help answer your Finance questions. Feel free to interject at any time if you need clarification.

 

Under Absorption Costing, all costs are included. Under Variable costing, only variable costs are included.

A) Direct materials$35 * 5200 = 182000
B) Direct labor$16.8 * 5200 = 87360
C) Fixed FOH$5.6 * 5200 = 29120
D) Variable FOH$4.9 * 5200 = 25480

 

Absorption Costing = A+B+C+D = 323,960

Variable Costing = A+B+D = 294,840

DanielleCPA, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 781
Experience: CPA experienced in tax and financial planning
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