The following data pertain to one month's operations of Whitney, Inc.:
$\begin{array} { | l | r | }
\hline \text { Units in beginning inventory } & 0 \
\hline \text { Units produced } & 9,000 \
\hline \text { Units sold } &8,000 \
\hline \text { Variable costs per unit: } & \
\hline \text { Manufacturing } & \$ 10 \
\hline \text { Selling and administrative } & \$ 6 \
\hline \text { Fixed costs in total } & \
\hline \text { Manufacturing } & \$ 18,000 \
\hline \text { Selling and administrative } & \$ 27,000 \
\hline
\end{array}$

-What was the carrying value on the balance sheet of the ending finished goods inventory under absorption costing?
A) $10,000.
B) $12,000.
C) $16,000.
D) $21,000.

Question

The following data pertain to one month's operations of Whitney, Inc.:
$\begin{array} { | l | r | } 
\hline \text { Units in beginning inventory } & 0 \
\hline \text { Units produced } & 9,000 \
\hline \text { Units sold } &8,000 \ 
\hline \text { Variable costs per unit: } &  \
\hline \text { Manufacturing } & \$ 10 \
\hline \text { Selling and administrative } & \$ 6 \
\hline \text { Fixed costs in total } & \
\hline \text { Manufacturing } & \$ 18,000 \
\hline \text { Selling and administrative } & \$ 27,000 \
\hline
\end{array}$

-What was the carrying value on the balance sheet of the ending finished goods inventory under absorption costing?
A) $10,000.
B) $12,000.
C) $16,000.
D) $21,000.

Quizplus · Accepted Answer

Absorption costing includes all manufacturing costs in the cost of a product, including fixed overhead costs. The ending finished goods inventory valuation under absorption costing formula is: Beginning finished goods inventory + Cost of goods manufactured - Cost of goods sold. Given the information in the question, the calculation would be: $8,000 + $20,000 - $16,000 = $12,000. Therefore, the carrying value on the balance sheet of the ending finished goods inventory under absorption costing is $12,000.

The Following Data Pertain to One Month's Operations of Whitney