Comstat\'s contribution income statement utilizing variable costing appears belo

Question

Comstat's contribution income statement utilizing variable costing appears below:
Comstat Company
Income Statement
For the Year ended December 31, 2007
Sales ($28/unit) $840,000
Less variable costs:
COGS 420,000
Selling & Admin 72,000
Contribution Margin 348,000
Fixed overhead 80,000
Fixed Selling & Admin 90,000
Net Income $178,000

Comstat Company produced 40,000 units during the year. Variable and fixed production costs have remained constant the entire year. There were no beginning inventories.

The dollar value of the ending inventory using full costing will be:
Answer


$160,000

$186,500

$140,000

$164,000

Explanation / Answer

1. Identify the per unit product costs first

a. $840,000/$28 per unit= 30,000 units sold

b. $420,000/30,000 units sold= $14 per unit variable costs

c. $80,000/ 40,000 units produced= $2 per unit fixed MOH

2. If 40,000 unit were produced and 30,000 unit were sold, then 10,000 units remain in ending inventory

3. Therefore, the value of ending inventory under Full Costing is 10,000 units* $16 product costs= $160,000

Answer- A. 160,000

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