Inventory Valuation under Absorption Costing During the most recent year, Judson

Question

Inventory Valuation under Absorption Costing

During the most recent year, Judson Company had the following data associated with the product it makes:

Required:

1. How many units are in ending inventory?

$ units

2. Using absorption costing, calculate the per-unit product cost.

$

3. What is the value of ending inventory under absorption costing?

Units in beginning inventory 300 Units produced 15,000 Units sold ($300 per unit) 12,700 Variable costs per unit: Direct materials $20 Direct labor $60 Variable overhead $12 Fixed costs: Fixed overhead per unit produced $30 Fixed selling and administrative $140,000

Explanation / Answer

1. Units Ending Inventory = Units Beginning Inventory + Units Produced - Units Sold

   = 300 + 15000 + 12700

                                     = 2600

2.

3. Value of Ending Inventory = Units Ending Inventory * Absorption Unit Product Cost

                                          = 2600 * 122

                                          = $317200

2. Calculation of per-unit product cost Direct Material $20 Direct Labour $60 Variable Overhead $12 Fixed Overhead $30 Unit Product Cost $122

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