Krepps Corporation produces a single product. Last year, Krepps manufactured 34,

Question

Krepps Corporation produces a single product. Last year, Krepps manufactured 34,060 units and sold 28,600 units. Production costs for the year were as follows:

Sales totaled $1,172,600 for the year, variable selling and administrative expenses totaled $148,720, and fixed selling and administrative expenses totaled $214,578. There was no beginning inventory. Assume that direct labor is a variable cost.

Under absorption costing, the ending inventory for the year would be valued at:

Direct materials $ 255,450 Direct labor $ 173,706 Variable manufacturing overhead $ 269,074 Fixed manufacturing overhead $ 510,900

Explanation / Answer

Absorption costing Direct materials ($255,450 ÷ 34,060 units produced) 7.5 Direct labor ($173,706 ÷ 34,060 units produced) 5.1 Variable manufacturing overhead ($269,074 ÷ 34,060 units produced) 7.9 Fixed manufacturing overhead cost ($510,900 ÷ 34,060 units produced) 15 Absorption costing unit product cost (a) 35.5 Units in ending inventory (34060-28600) (b) 5460 Value of ending inventory under absorption costing (a) × (b) 193830

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