Question

g g its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $7 per unit, Direct labor, $5 per unit, Variable overhead, $6 per unit, and Fixed overhead, $270,000. The company produced 27,000 units, and sold 18,500 units, leaving 8,500 units in inventory at year-end. What is the value of ending inventory under absorption costing?

Answer 1

Inventory= $238,000

Step-by-step explanation:

Giving the following information:

Direct materials, $7 per unit

Direct labor, $5 per unit

Variable overhead, $6 per unit

Fixed overhead, $270,000.

The company produced 27,000 units, and sold 18,500 units, leaving 8,500 units in inventory at year-end.

Unitary fixed overhead= 270,000/27,000= $10 per unit

Total unitary cost= 7+5+6+10= $28

Inventory= 28*8500= $238,000