Brown Corporation produced 2,200 units during the most recent period. Brown's costs were as follows: If Brown uses absorption costing, what amount per unit would be included in ending inventory?
A) $2.32
B) $1.73
C) $2.00
D) $1.36
E) $2.14

Question

Brown Corporation produced 2,200 units during the most recent period. Brown's costs were as follows:  If Brown uses absorption costing, what amount per unit would be included in ending inventory?
A) $2.32 
B) $1.73 
C) $2.00 
D) $1.36 
E) $2.14

Quizplus · Accepted Answer

To calculate the ending inventory using absorption costing, we need to include all manufacturing costs in the inventory. These costs include direct materials, direct labor, and overhead costs.

Total manufacturing costs = $4,000 + $3,000 + $8,000 = $15,000

Per unit manufacturing costs = $15,000 ÷ 2,200 = $6.82

Per unit overhead costs = $8,000 ÷ 2,200 = $3.64

Per unit cost using absorption costing = $6.82 + $3.64 = $10.46

Therefore, the amount per unit included in ending inventory using absorption costing is $10.46 - $8.46 (per unit variable cost) = $2.00.

Hence, option C is the correct answer.

Brown Corporation Produced 2,200 Units During the Most Recent Period