Steele Corporation bas the following information for January, February, and Marc

Question

Steele Corporation bas the following information for January, February, and March: January February March Units produced 10,000 10,000 10,000 Units sold 7,000 . 8,500 10,500 Production costs per unit (based on 10,000 units) are as follows: Direct materials S12 Direct labor Variable factory overhead Fixed factory overhead Variable selling and admin expenses Fixed selling and admin expenses There were no beginning inventories for January, and all units were sold for $50. Costs are stable over the three 10 months What is the Febraary ending inventory for Steele Corporation using the absorption costing method? $39.000o $45,000 $135,000 S300.000

Explanation / Answer

The correct option is $135,000 Cost under absorption costing = (Direct materials+Direct labor+Variable factory overhead+Fixed factory overhead) = (12+8+6+4) = 30 Ending inventory February:- Beginning inventory for January (10,000-7,000)          3,000 Add : Units produced        10,000 Less : units sold          (8,500) Ending inventory units          4,500 Hence, cost of ending inventory for February = (4,500*30) = $135,000

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