Question

Inventory Valuation under Absorption Costing During the most recent year, Judson Company had the following data associated with the product it makes: 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 How many units are in ending inventory?

Answer 1

Value(ending inventory) = Units (ending inventory) × Cost per unit

= (2600 × 122)

= $ 317,200

Step-by-step explanation:

Given :

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

Units in ending inventory = Units in beginning inventory + Units produced - Units sold ($300 per unit)

= $300 + $15000 - $12700

= $2600

Cost per unit = Variable costs per unit + Fixed costs

= (Direct material + Direct labor + Variable overhead) + Fixed overhead per unit produced

= ($20 + $60 + $12) + $30

= $122

Value of ending inventory = Units in ending inventory × Cost per unit

= (2600 × 122)

= $ 317,200