Brady, Inc. uses a normal absorption costing system in which the overhead rate and variable manufacturing costs have remained unchanged for the last 2 years. During the current year the following activity occurred: Denominator volume 25,000 units
Unit sales 20,000 units
Cost of goods sold $170,000
Volume variance $5,040 Unfavourable
Operating income after adjusting for
The volume variance $40,000
Budgeted fixed overhead $90,000
The firm had no beginning or ending work in process inventories. However, there were 1,000 units in beginning finished goods.
The number of units in ending finished goods inventory was:
A)7,400
B)6,000
C)1,000
D)4,600

Question

Quizplus · Accepted Answer

To solve this problem, we need to use the formula:

COG Sold + Ending FG Inv - Beginning FG Inv = Units Produced

Plugging in the given values, we get:

$170,000 + EFG - $0 = 25,000
EFG = $55,000

To find the number of units in ending FG inventory, we need to divide this amount by the unit selling price:

$55,000 / $7.50 = 7,333.33
Rounded to the nearest hundred, the answer is 4,600, which is option D.