The following information pertains to Stark Corporation:
$\begin{array}{lr}
\text { Beginning inventory } & 0 \text { units } \
\text { Ending inventory } & 5,000 \text { units } \
\text { Direct labour per unit } & \$ 20 \
\text { Direct materials per unit } & 16 \
\text { Variable overhead per unit } & 4 \
\text { Fixed overhead per unit } & 10 \
\text { Variable selling costs per unit } & 12 \
\text { Fixed selling costs per unit } & 16
\end{array}$
-Refer to the figure.What is the value of ending inventory using the absorption costing method?
A)$200,000
B)$250,000
C)$310,000
D)$390,000

Question

Quizplus · Accepted Answer

Under the absorption costing method, the value of ending inventory includes all manufacturing costs (direct materials, direct labor, variable overhead, and fixed overhead) but excludes selling costs. The calculation is as follows: (Direct materials per unit + Direct labor per unit + Variable overhead per unit + Fixed overhead per unit) * Ending inventory units = ($16 + $20 + $4 + $10) * 5,000 = $250,000.

The Following Information Pertains to Stark Corporation -Refer to the Figure