WebFlicks is an online DVD company that produces its own DVD copies of first-run movies that it sells for $8.00 each. The following information is available (Assume the same unit costs in all years): $\begin{array}{ll}
\text { Variable costs: }\
\text { Product royalty fees } & \$ 3.30 \text { per DVD } \
\text { DVD production } & \$ 1.20 \text { per DVD } \
\text { Selling and admin costs } & \$ 0.80 \text { per DVD }\
\text { Fixed Costs: }\
\text { Production } & \$ 128,000 \text { per month } \
\text { Selling and administration } & \$ 130,000 \text { per month }
\end{array}$ During June, 160,000 DVDs were produced and 144,000 were sold. There were 17,000 DVDs in beginning inventory. How much is inventory at the end of the month under full costing?

Question

Quizplus · Accepted Answer

Under full costing, inventory is valued at the full cost per unit, which includes both variable and fixed costs. The total cost per DVD is $5.30 (variable costs) + $1.61 (fixed costs per unit, calculated as total fixed costs divided by units produced). The ending inventory is 33,000 DVDs (17,000 beginning + 160,000 produced - 144,000 sold). Therefore, the inventory value is 33,000 DVDs * $5.91 = $174,900.

WebFlicks Is an Online DVD Company That Produces Its Own