Calculate Inventory Cost Under Absorption

Question

Carr Company produces a single product. During the past year, Carr manufactured 25,000 units and sold 20,000 units. Production costs for the year were as follows:

Fixed manufacturing overhead           $250,000

Variable manufacturing overhead       $210,000

Direct labor                                         $120,000

Direct materials                                   $180,000

Sales totaled $850,000, variable selling expenses totaled $110,000, and fixed selling and administrative expenses totaled $170,000. There were no units in beginning inventory. Assume that direct labor is a variable cost. Under absorption costing, the ending inventory for the year would be valued at:

a. $213,500

b. $179,500

c. $152,000

d. $222,000

Summary

The question belongs to Accounting and it discusses about calculation of inventory cost under absorption.

Total Word Count 53