Hahn Corporation Hahn Corporation produces a single product that sells for $7.00 per unit.Standard capacity is 100,000 units per year;100,000 units were produced and 80,000 units were sold during the year.Manufacturing costs and selling and administrative expenses are presented below. There were no variances from the standard variable costs.Any under- or overapplied overhead is written off directly at year-end as an adjustment to cost of goods sold.

Fixed costs Variable costs

Direct material $0 $1.50 per unit produced

Direct labor 0 1.00 per unit produced

Manufacturing overhead $150,000 0.50 per unit produced

Selling & Administration expense 80,000 0.50 per unit sold

Hahn Corporation had no inventory at the beginning of the year. Refer to Hahn Corporation.In presenting inventory on the balance sheet at December 31,the unit cost under absorption costing is A)$2.50. B)$3.00. C)$3.50. D)$4.50.

Question

Hahn Corporation
Hahn Corporation produces a single product that sells for $7.00 per unit.Standard capacity is 100,000 units per year;100,000 units were produced and 80,000 units were sold during the year.Manufacturing costs and selling and administrative expenses are presented below.
There were no variances from the standard variable costs.Any under- or overapplied overhead is written off directly at year-end as an adjustment to cost of goods sold.

	Fixed costs	Variable costs
Direct material	$0	$1.50 per unit produced
Direct labor	0	1.00 per unit produced
Manufacturing overhead	$150,000	0.50 per unit produced
Selling & Administration expense	80,000	0.50 per unit sold

Hahn Corporation had no inventory at the beginning of the year. Refer to Hahn Corporation.In presenting inventory on the balance sheet at December 31,the unit cost under absorption costing is A)$2.50. B)$3.00. C)$3.50. D)$4.50.

Quizplus · Accepted Answer

Under absorption costing, both variable and fixed manufacturing costs are included in the per-unit cost of inventory. The total manufacturing cost per unit is calculated as follows:

Direct Materials + Direct Labor + Variable Manufacturing Overhead + Fixed Manufacturing Overhead/Units Produced

$2.00 + $1.00 + $0.50 + $1.00 = $4.50

Therefore, the unit cost of inventory under absorption costing is $4.50, and the total value of inventory at December 31 would be $360,000 ($4.50 x 80,000 units).

Hahn Corporation Hahn Corporation Produces a Single Product That Sells for $7.00