Boulder Blowers produces snow blowers.The selling price per snow blower is $100.Costs involved in production are: $\begin{array}{lr}
\text { Direct material per unit } & 20 \
\text { Direct labor per unit } & 12 \
\text { Variable manufacturing overhead per unit } & 10 \
\text { Fixed manufacturing overhead per year } & 148,500
\end{array}$ In addition, the company has fixed selling and administrative costs of $150,000 per year.During the year, Boulder produces 45,000 snow blowers and sells 30,000 snow blowers.Beginning inventory consists of no units.How much fixed manufacturing overhead is in ending inventory under full costing?
A)$0
B)$49,500
C)$148,500
D)$99,000

Question

Quizplus · Accepted Answer

Under full costing (also known as absorption costing), both variable and fixed manufacturing overhead costs are allocated to the product. To find the fixed manufacturing overhead in ending inventory, we first determine the fixed manufacturing overhead cost per unit, which is $148,500 / 45,000 units = $3.30 per unit. Since 15,000 units (45,000 produced - 30,000 sold) are in ending inventory, the fixed manufacturing overhead in ending inventory is 15,000 units * $3.30 = $49,500.

Boulder Blowers Produces Snow Blowers In Addition, the Company Has Fixed Selling and Administrative Costs