Acme Manufacturing produces a standard sized radiator for central heating systems. Parts for each radiator cost £20 and direct labour of £10 is incurred in the production of each radiator along with direct expenses of £5. Annual factory overheads total up to £200,000 for the year. The directors of Acme Manufacturing expect to produce 25,000 radiators each year but due to difficulties in the manufacturing process in the financial year to 31 December 2019, only 20,000 radiators were produced. The selling price of each radiator is £55. At 31 December 2019, there were 1,000 radiators held in inventory. What is the total value of this closing inventory on an absorption costing basis?

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The Answer of Acme Manufacturing produces a standard sized radiator for central heating systems. Parts for each radiator cost £20 and direct labour of £10 is incurred in the production of each radiator along with direct expenses of £5. Annual factory overheads total up to £200,000 for the year. The directors of Acme Manufacturing expect to produce 25,000 radiators each year but due to difficulties in the manufacturing process in the financial year to 31 December 2019, only 20,000 radiators were produced. The selling price of each radiator is £55. At 31 December 2019, there were 1,000 radiators held in inventory. What is the total value of this closing inventory on an absorption costing basis?

Acme Manufacturing Produces a Standard Sized Radiator for Central Heating