Brown Corporation produced 2,200 units during the most recent period.Brown's costs were as follows: $\begin{array}{lr}
\text { Direct material } & \$ 1,000 \
\text { Direct labor } & 2,000 \
\text { Variable manufacturing overhead } & 500 \
\text { Variable marketing and sales } & 300 \
\text { Fixed manufacturing overhead } & 900 \
\text { Fixed marketing and sales } & 400
\end{array}$ If Brown uses absorption costing, what amount per unit would be included in ending inventory?

Question

Quizplus · Accepted Answer

Under absorption costing, only manufacturing costs (direct material, direct labor, variable manufacturing overhead, and fixed manufacturing overhead) are included in the cost of inventory. The total manufacturing costs are $1,000 (direct material) + $2,000 (direct labor) + $500 (variable manufacturing overhead) + $900 (fixed manufacturing overhead) = $4,400. Dividing this by the number of units produced (2,200 units) gives a per unit cost of $2.00.

Brown Corporation Produced 2,200 Units During the Most Recent Period