Leesburg Bags produces backpacks. The costs and prices for the backpacks follow (Assume the same unit costs in all years): $\begin{array}{lr}
\text { Selling price }&\$ 23.00 \text { per backpack }\
\text { Variable costs: }\
\text { Production } & \$ 11.00 \text { per backpack } \
\text { Selling } & \$ 2.00 \text { per backpack }\
\text { Fixed Costs: }\
\text { Production }&\$ 900,000 \text { per Year }\
\text { Selling and administrative }&\$540,000 \text { per Year }
\end{array}$ Leesburg Bags produced 250,000 backpacks for the year and sold 200,000. There was no beginning inventory, and costs throughout the year were stable. How much is the cost of ending inventory under full costing?

Question

Quizplus · Accepted Answer

The correct answer is A.The cost of ending inventory under full costing is $730,000. This is calculated as follows:Ending inventory = 50,000 backpacks * $14.60 per backpack = $730,000The $14.60 per backpack is the full cost per backpack, which includes both variable and fixed costs. The variable costs are $11.00 + $2.00 = $13.00 per backpack. The fixed costs are $900,000 + $540,000 = $1,440,000. The full cost per backpack is $13.00 + $1,440,000 / 250,000 = $14.60.

Leesburg Bags Produces Backpacks Leesburg Bags Produced 250,000 Backpacks for the Year and Sold