Gordon Company produces a single product that sells for $10 per unit. Last year there were no beginning inventories, 100,000 units were produced, and 80,000 units were sold. The company has the following cost structure:
-The carrying value on the balance sheet of the ending finished goods inventory under absorption costing would be:
A)$80,000
B)$104,000
C)$110,000
D)$124,000

Question

Gordon Company produces a single product that sells for $10 per unit. Last year there were no beginning inventories, 100,000 units were produced, and 80,000 units were sold. The company has the following cost structure: 
-The carrying value on the balance sheet of the ending finished goods inventory under absorption costing would be:
A)$80,000 
B)$104,000 
C)$110,000 
D)$124,000

Quizplus · Accepted Answer

Under absorption costing, the ending finished goods inventory is valued at the sum of the direct materials, direct labor, and manufacturing overhead costs incurred during the period. In this case, the ending finished goods inventory is valued at $104,000 (direct materials of $20,000 + direct labor of $40,000 + manufacturing overhead of $44,000).

Gordon Company Produces a Single Product That Sells for $10