Reynolds Company has estimated its finished goods inventory-handling costs at $240,000.It has determined that an appropriate cost driver is the number of units completed.It estimates that 500,000 units will be completed this year.If 40,000 units are completed during the current month,what amount of inventory-handling cost should be recognized?
A)$83,333
B)$24,000
C)$20,000
D)$19,200

Question

Quizplus · Accepted Answer

Using the cost driver of number of units completed, we can calculate the cost of inventory-handling for the current month as:

Cost per unit = Total estimated inventory-handling costs / Total estimated units completed
Cost per unit = $240,000 / 500,000 units
Cost per unit = $0.48

Total cost for current month = Cost per unit x Number of units completed in current month
Total cost = $0.48 x 40,000 units
Total cost = $19,200

Therefore, the inventory-handling cost recognized for the current month would be $19,200. Option D is correct.

Reynolds Company Has Estimated Its Finished Goods Inventory-Handling Costs at $240,000.It