Question

Boysenberry Corp. has the following information for the months of January, February, and March of the current year: JanuaryFebruaryMarch Units produced10,00010,00010,000 Units sold9,5009,4009,800 Production costs per unit (based on 10,000 units) are as follows: Direct materials$20.00 Direct labor15.00 Variable factory overhead8.00 Fixed factory overhead4.00 Variable selling and admin. expenses10.50 Fixed selling and admin. expenses5.75 There was no beginning inventory in the month of January, and all units were sold for $75. Costs were stable over the three months. Calculate Boysenberry's ending inventory cost for February using the absorption costing method.

Answer 1

$51,700

Step-by-step explanation:

The computation of ending inventory cost is shown below:-

Product cost per unit = Direct material + Direct labor + Variable factory overhead + Fixed factory overhead

= $20 + $15 + $8 + $4

= $47

Ending inventory, February = 10,000 + 10,000 - 9,500 - 9,400

= 1,100

Ending inventory value under absorption costing = Product cost per unit × Ending inventory, February

= $47 × 1,100

= $51,700

Therefor for computing the ending inventory value under absorption costing we simply applied the above formula.