Kern Corporation produces a single product. Selected information concerning the operations of the company follow: Assume that direct labor is a variable cost.Under absorption costing, the value of the ending finished goods inventory would be:

A) $7,200
B) $7,650
C) $8,000
D) $9,700

Question

Kern Corporation produces a single product. Selected information concerning the operations of the company follow:

Assume that direct labor is a variable cost.Under absorption costing, the value of the ending finished goods inventory would be:

A) $7,200
B) $7,650
C) $8,000
D) $9,700

Raman Chuahan · Accepted Answer

Final Answer : D, Explanation :  Under absorption costing, the ending finished goods inventory includes both variable and fixed manufacturing costs. Therefore, we need to calculate the total cost of the ending finished goods inventory by adding the variable and fixed manufacturing costs per unit and multiplying this by the number of units in the ending finished goods inventory.Total cost per unit = variable manufacturing cost per unit + fixed manufacturing cost per unitTotal cost per unit = $11 + ($6,000 ÷ 1,500 units)Total cost per unit = $15 per unitEnding finished goods inventory = 650 unitsTotal cost of ending finished goods inventory = 650 units x $15 per unitTotal cost of ending finished goods inventory = $9,750Therefore, the value of the ending finished goods inventory under absorption costing would be $9,700 (rounded to the nearest dollar).

Kern Corporation produces a single product. Selected information concerning the operations of the company follow: Assume that direct labor is a variable cost.Under absorption costing, the value of the ending finished goods inventory would be:

A) $7,200
B) $7,650
C) $8,000
D) $9,700

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Learning Objectives

Related questions

Kern Corporation produces a single product. Selected information concerning the operations of the company follow: Assume that direct labor is a variable cost.Under absorption costing, the value of the ending finished goods inventory would be:A) $7,200B) $7,650C) $8,000D) $9,700

Definitions

Learning Objectives

Learning Objectives

Related questions

Kern Corporation produces a single product. Selected information concerning the operations of the company follow: Assume that direct labor is a variable cost.Under absorption costing, the value of the ending finished goods inventory would be:

A) $7,200
B) $7,650
C) $8,000
D) $9,700