17 A business operates at 100% of capacity during its first month and incurs the

Question

17 A business operates at 100% of capacity during its first month and incurs the following costs: Production costs (10,000 units): Direct materials Direct labor Variable factory overhead Fixed factory overhead $ 80,000 120,000 140,000 40.000 $380,000 Operating expenses: Variable operating expenses $ 65,000 Fixed operating expenses 25,000 90,000 If 600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the absorption costing balance sheet? a. $24,300 b. $28,200 c. $22,800 d. $34,000

Explanation / Answer

Absorption unit product cost = 380000/10000 = $38 Amount of inventory = 600*38= $22800 Option C is correct

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