The following information is available for Barnes Company for the fiscal year ended December 31:
$\begin{array}{llr}
\text { Beginning finished goods inventory in units } &0\
\text {Units produced } &4,800\
\text { Units sold } &4,000\
\text { Sales } &\$400,000\
\text { Materials cost } &\$96,000\
\text { Variable conversion cost used } &\$48,000\
\text { Fixed manufacturing cost} &\$72,000\
\text { Indirect operating costs (fixed)} &\$80,000\
\end{array}$

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Cost of goods sold using absorption costing is:
A) $246,667
B) $120,000
C) $180,000
D) $40,000

Question

The following information is available for Barnes Company for the fiscal year ended December 31:
$\begin{array}{llr}
  \text {  Beginning finished goods inventory in units } &0\
 \text {Units produced  } &4,800\
 \text { Units sold } &4,000\
 \text { Sales } &\$400,000\
 \text { Materials cost } &\$96,000\
 \text { Variable conversion cost used } &\$48,000\
 \text {  Fixed manufacturing cost} &\$72,000\
 \text {  Indirect operating costs (fixed)} &\$80,000\
\end{array}$
 
-
Cost of goods sold using absorption costing is:
A) $246,667
B) $120,000
C) $180,000
D) $40,000

Quizplus · Accepted Answer

Under absorption costing, the cost of goods sold includes all manufacturing costs (both variable and fixed). The cost per unit is calculated by adding materials cost, variable conversion cost, and fixed manufacturing cost, then dividing by units produced. The cost per unit is $(\$96,000 + \$48,000 + \$72,000) / 4,800 = \$45$. Therefore, COGS for 4,000 units sold is $4,000 \times \$45 = \$180,000$.

The Following Information Is Available for Barnes Company for the Fiscal