Figure 7-4
The following information pertains to Stark Ltd.:
$$\begin{array} { l r }
\text { Beginning inventory } & 0 \text { units } \
\text { Ending inventory } & 5,000 \text { units } \
\text { Direct labour per unit } & £ 20 \
\text { Direct materials per unit } & 16 \
\text { Variable overhead per unit } & 4 \
\text { Fixed overhead per unit } & 10 \
\text { Variable selling costs per unit } & 12 \
\text { Fixed selling costs per unit } & 16
\end{array}$$
-Refer to Figure 7-4. What is the value of ending inventory using the absorption costing method?
A)£310,000
B)£250,000
C)£200,000
D)£390,000

Question

Figure 7-4
The following information pertains to Stark Ltd.:
$$\begin{array} { l r } 
\text { Beginning inventory } & 0 \text { units } \
\text { Ending inventory } & 5,000 \text { units } \
\text { Direct labour per unit } & £ 20 \
\text { Direct materials per unit } & 16 \
\text { Variable overhead per unit } & 4 \
\text { Fixed overhead per unit } & 10 \
\text { Variable selling costs per unit } & 12 \
\text { Fixed selling costs per unit } & 16
\end{array}$$
-Refer to Figure 7-4. What is the value of ending inventory using the absorption costing method?
A)£310,000
B)£250,000
C)£200,000
D)£390,000

Quizplus · Accepted Answer

Under the absorption costing method, the value of ending inventory includes direct materials, direct labor, variable overhead, and fixed overhead per unit. The calculation is as follows: (Direct materials + Direct labor + Variable overhead + Fixed overhead) * Ending inventory units = (£16 + £20 + £4 + £10) * 5,000 = £50 * 5,000 = £250,000.

Figure 7-4 the Following Information Pertains to Stark Ltd -Refer to Figure 7-4

Figure 7-4
the Following Information Pertains to Stark Ltd -Refer to Figure 7-4