Question

Inventory Valuation under Absorption CostingDuring the most recent year, Judson Company had the following data associated with the product it makes:Units in beginning inventory 300Units produced 15,000Units sold ($300 per unit) 12,700Variable costs per unit: Direct materials $20 Direct labor $60 Variable overhead $12Fixed costs: Fixed overhead per unit produced $30 Fixed selling and administrative $140,000Required:1. How many units are in ending inventory?2. Using absorption costing, calculate the per-unit product cost.3. What is the value of ending inventory under absorption costing?

Answer 1

Answer:

(1) 2,600

(2) $122

(3) $317,200

Explanation:

(1) Ending Inventory:

= Beginning Inventory + Number of Units Produced - Number of  Units Sold

= 300 + 15,000 - 12,700

= 2,600

(2) Per-unit product cost:

= Direct Material + Direct Labour + Variable Overhead + Fixed Overhead

= $20 + $60 + $12 + $30

= $122

(3) Value of Ending Inventory under absorption costing:

= Ending Inventory × Absorption Per-unit product cost

= 2,600 × $122

= $317,200