During its first year of operations, Carlos Manufacturing Corporation incurred the following costs to produce 8, 000 units of its only product: The company also incurred the following costs in selling 7, 500 units of product during its first year: Assume that direct labor is a variable cost. Under absorption costing, what is the total cost that would be assigned to Carlos' finished goods inventory at the end of the first year of operations?
A)$15, 000
B)$42, 125
C)$44, 000
D)$47, 125

Question

During its first year of operations, Carlos Manufacturing Corporation incurred the following costs to produce 8, 000 units of its only product:  The company also incurred the following costs in selling 7, 500 units of product during its first year:  Assume that direct labor is a variable cost. Under absorption costing, what is the total cost that would be assigned to Carlos' finished goods inventory at the end of the first year of operations?
A)$15, 000 
B)$42, 125 
C)$44, 000 
D)$47, 125

Quizplus · Accepted Answer

Unit product cost under absorption costing:
 11eaa0c8_95bf_a76d_9cb2_0d77ecec4525_TB2487_00 Units in ending inventory = Units in beginning inventory + Units produced - Units sold
= 0 units + 8, 000 units - 7, 500 units = 500 units
Value of ending finished goods inventory = $84.25 per unit × 500 units = $42, 125

During Its First Year of Operations, Carlos Manufacturing Corporation Incurred