A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units) : Direct materials $ 80,000 Direct labor 120,000 Variable factory overhead 140,000 Fixed factory overhead 40,000 $380,000 Operating expenses: Variable operating expenses $ 65,000 Fixed operating expenses 25,000 90,000 If 1,000 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the absorption costing balance sheet? a.$40,500 b.$47,000 c.$34,000 d.$38,000

Question

Business

Sullivan Watkins

6 October, 19:48

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units) : Direct materials $ 80,000 Direct labor 120,000 Variable factory overhead 140,000 Fixed factory overhead 40,000 $380,000 Operating expenses: Variable operating expenses $ 65,000 Fixed operating expenses 25,000 90,000 If 1,000 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the absorption costing balance sheet? a.$40,500 b.$47,000 c.$34,000 d.$38,000

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Kadyn Santos · Answer 1

d.$38,000

Explanation:

The computation of the inventory amount is shown below:

= (Total cost and expenses amount : number of units produced) * unsold units

= ($380,000 : 10,000 units) * 1,000 units

= $38,000

All other information which is given in the question is not relevant. Hence, ignored it

We simply divide the total cost and expenses amount with the production units and then multiply it by unsold units