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10 August, 06:59

Inventory Valuation under Absorption CostingDuring the most recent year, Judson Company had the following data associated with the product it makes:Units in beginning inventory 300Units produced 15,000Units sold ($300 per unit) 12,700Variable costs per unit: Direct materials $20 Direct labor $60 Variable overhead $12Fixed costs: Fixed overhead per unit produced $30 Fixed selling and administrative $140,000Required:1. How many units are in ending inventory?2. Using absorption costing, calculate the per-unit product cost. 3. What is the value of ending inventory under absorption costing?

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  1. 10 August, 09:49
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    (1) 2,600

    (2) $122

    (3) $317,200

    Explanation:

    (1) Ending Inventory:

    = Beginning Inventory + Number of Units Produced - Number of Units Sold

    = 300 + 15,000 - 12,700

    = 2,600

    (2) Per-unit product cost:

    = Direct Material + Direct Labour + Variable Overhead + Fixed Overhead

    = $20 + $60 + $12 + $30

    = $122

    (3) Value of Ending Inventory under absorption costing:

    = Ending Inventory * Absorption Per-unit product cost

    = 2,600 * $122

    = $317,200
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