Question

Uli produces stereo speakers. The selling price per pair of speakers is $1,930. There is no beginning inventory. Costs involved in production are: Direct material $162 Direct labor 210 Variable manufacturing overhead 98 Total variable manufacturing costs per unit $470 Fixed manufacturing overhead per year $679,420 In addition, the company has fixed selling and administrative costs: Fixed selling costs per year $199,000 Fixed administrative costs per year $102,500 During the year, Uli produces 1,610 pairs of speakers and sells 1,340 pairs. Exercise 5.4 Correct answer iconYour answer is correct. What is the value of ending inventory using full costing

Answer 1

Answer:

Ending inventory= $240,840

Explanation:

Giving the following information:

Total variable manufacturing costs per unit $470

Fixed manufacturing overhead per year $679,420

During the year, Uli produces 1,610 pairs of speakers and sells 1,340 pairs.

The full costing method (absorption costing) includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

First, we need to calculate the total production cost:

Total cost= 1,610*470 + 679,420

Total cost= $1,436,120

Now, the unitary cost and ending inventory cost:

Unitary cost= 1,436,120/1,610= $892

Ending inventory= $892*270 units

Ending inventory= $240,840