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?

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Business

Mara Kline

12 October, 17:49

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?

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Susan Beasley · Answer 1

Inventory = $238,000

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