A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials,$10 per unit,Direct labor,$6 per unit,Variable overhead,$70,000,and Fixed overhead,$120,000.
-Of the 10,000 units produced,9,200 were sold,and 800 remain in inventory at year-end.Under absorption costing,the value of the inventory is:

Question

Quizplus · Accepted Answer

First, we need to calculate the total cost per unit using absorption costing. Total cost per unit is calculated as follows:
Direct materials per unit + Direct labor per unit + Variable overhead per unit + (Total Fixed overhead/Number of units produced)
Total cost per unit = $10 + $6 + ($70,000/10,000) + ($120,000/10,000)
Total cost per unit = $23
Since 800 units remain in inventory, the value of the inventory is 800 units x $23 per unit = $18,400.
Therefore, the answer is C.

A Manufacturer Reports the Following Costs to Produce 10,000 Units