Steele Corporation has the following information for January,February,and March: $\begin{array}{lccc}
& \text { January } & \text { February } &\text { March }\
\text { Units produced } & 10,000 & 10,000&10,000 \
\text { Units sold } & 7,000 & 8,500 &10,500\

\end{array}$

$\begin{array}{lr}
\text { Production costs per unit (based on 10,000 units) are as follows: }\
\text { Direct materials } & \$ 12 \
\text { Direct labour } & 8 \
\text { Variable factory overhead } & 6 \
\text { Fixed factory overhead } & 4 \
\text { Variable selling and admin. expenses } & 10\
\text { Fixed selling and admin. expenses }&4
\end{array}$ There were no beginning inventories for January,and all units were sold for $50.Costs are stable over the three months.
What is the February ending inventory for Steele Corporation using the absorption costing method?
A)$39,000
B)$45,000
C)$135,000
D)$300,000

Question

Steele Corporation has the following information for January,February,and March: $\begin{array}{lccc}
 & \text { January } & \text { February } &\text { March }\
 \text { Units produced } & 10,000 & 10,000&10,000 \
\text { Units sold } & 7,000 & 8,500 &10,500\

\end{array}$

$\begin{array}{lr}
\text { Production costs per unit (based on 10,000 units) are as follows: }\
\text { Direct materials } & \$ 12 \
\text { Direct labour } & 8 \
\text { Variable factory overhead } & 6 \
\text { Fixed factory overhead } & 4 \
\text { Variable selling and admin. expenses } & 10\
\text { Fixed selling and admin. expenses }&4
\end{array}$ There were no beginning inventories for January,and all units were sold for $50.Costs are stable over the three months.
What is the February ending inventory for Steele Corporation using the absorption costing method?
A)$39,000
B)$45,000
C)$135,000
D)$300,000

Quizplus · Accepted Answer

Under the absorption costing method, the ending inventory includes all manufacturing costs (direct materials, direct labor, variable factory overhead, and fixed factory overhead) but excludes selling and administrative expenses. For February, the calculation is as follows:- Units produced in February: 10,000- Units sold in February: 8,500- Ending inventory units in February: 10,000 - 8,500 = 1,500 unitsCost per unit under absorption costing:- Direct materials: $12- Direct labor: $8- Variable factory overhead: $6- Fixed factory overhead: $4Total cost per unit = $12 + $8 + $6 + $4 = $30Ending inventory value for February:- 1,500 units * $30 = $45,000Therefore, the correct answer is $45,000.

Steele Corporation Has the Following Information for January,February,and March