A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (20,400 units) : Direct materials $172,600 Direct labor 232,000 Variable factory overhead 266,700 Fixed factory overhead 90,000 $761,300 Operating expenses: Variable operating expenses $124,000 Fixed operating expenses 47,100 171,100 If 1,900 units remain unsold at the end of the month, the amount of inventory that would be reported on the absorption costing balance sheet is

Question

Liberty Welch

Business

30 December, 16:29

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (20,400 units) : Direct materials $172,600 Direct labor 232,000 Variable factory overhead 266,700 Fixed factory overhead 90,000 $761,300 Operating expenses: Variable operating expenses $124,000 Fixed operating expenses 47,100 171,100 If 1,900 units remain unsold at the end of the month, the amount of inventory that would be reported on the absorption costing balance sheet is

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Danika Crosby · Answer 1

The amount of inventory that would be reported on the absorption costing balance sheet is $70,905

Explanation:

In order to Calculate the amount of inventory under absorption Costing to be reported on the balance sheet, we would have to use the following formula:

amount of inventory under absorption Costing = (Direct materials+Direct labor+Variable factory overhead + Fixed factory overhead) / (Production costs units) * units remain unsold

amount of inventory under absorption Costing = ($761,300/20,400) * 1,900

amount of inventory under absorption Costing = $70,905

The amount of inventory that would be reported on the absorption costing balance sheet is $70,905