Question

The following information pertains to Guillotine Corporation: Beginning inventory 1,000 units Ending inventory 6,000 units Direct labor per unit $40 Direct materials per unit $20 Variable overhead per unit $10 Fixed overhead per unit $30 Variable selling and admin. costs per unit $6 Fixed selling and admin. costs per unit $14
A) What is the value of the ending inventory using the absorption costing method?a) $600,000b) $100,000c) $120,000d) $70,000

Answer 1

Answer:

Value of the ending inventory=$600,000

Option A is correct ($600,000)

Explanation:

Given Data:

Ending inventory=6,000 units

Direct labor per unit =$40

Direct materials per unit=$20

Variable overhead per unit =$10

Fixed overhead per unit=$30

Required:

Value of the ending inventory=?

Solution:

Value of the ending inventory=(Direct labor per unit+Direct materials per unit+Variable overhead per unit + Fixed overhead per unit)*Ending inventory

Value of the ending inventory=($40+$20+$10+$30)*6000

Value of the ending inventory=$100*6000

Value of the ending inventory=$600,000

Option A is correct ($600,000)