A business operated at 100% of capacity during its first month and incurred the

Question

A business operated at 100% of capacity during its first month and incurred the following costs:

If 1,800 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.$85,642

b.$72,320

c.$69,372

d.$60,049

Production costs (19,700 units): Direct materials $173,800 Direct labor 237,600 Variable factory overhead 245,800 Fixed factory overhead 102,100 $759,300 Operating expenses: Variable operating expenses $134,300 Fixed operating expenses 43,700 178,000

Explanation / Answer

Total production cost = 759300

Ending inventory units = 1800 units

Ending inventory cost = 759300/19700 = 38.54 per unit (38.54*1800) = 69372

so answer is c) $69,372

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