Question

Assumes Tiger Company had 60 units in beginning Finished Goods Inventory and sold 1,200 units. Additional data includes:

Units produced
1,300
units
Direct materials
$13
per unit
Direct labor
9
per unit
Variable manufacturing overhead
3
per unit
Fixed manufacturing overhead
8
per unit


Using absorption costing, what is the dollar amount of ending Finished Goods Inventory?

Answer 1

The answer is: Ending inventory is $5,280

Step-by-step explanation:

Absorption costing dictates that all of the manufacturing costs have been assigned to the units produced.

• Initial inventory: 60 units
• Units produced: 1,300 units
• Units sold: 1,200 units
• Ending inventory: 160 units

Each produced unit costs $13 (direct materials) + $9 (direct labor) + $3 (variable overhead) + $8 (fixed overhead) = $33 per unit

Ending inventory = 160 units x $33 per unit = $5,280