Sutherland, Inc. reports the following information: $$\begin{array} { | l | r | l | }
\hline \text { Units produced } & 580 & \text { units } \
\hline \text { Units sold } & 470 & \text { units } \
\hline \text { Sales price } & \$ 200 & \text { per unit } \
\hline \text { Direct materials } & \$ 29 & \text { per unit } \
\hline \text { Direct labor } & \$ 8 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 13 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 16,600 & \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 6 & \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 14,000 & \text { per year } \
\hline
\end{array}$$ There are no beginning inventories. What is the ending balance in Finished Goods Inventory using absorption costing? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)
A) $7218
B) $3148
C) $5500
D) $8648

Question

Sutherland, Inc. reports the following information: $$\begin{array} { | l | r | l | } 
\hline \text { Units produced } & 580 & \text { units } \
\hline \text { Units sold } & 470 & \text { units } \
\hline \text { Sales price } & \$ 200 & \text { per unit } \
\hline \text { Direct materials } & \$ 29 & \text { per unit } \
\hline \text { Direct labor } & \$ 8 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 13 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 16,600 & \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 6 & \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 14,000 & \text { per year } \
\hline
\end{array}$$ There are no beginning inventories. What is the ending balance in Finished Goods Inventory using absorption costing? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)
A) $7218
B) $3148
C) $5500
D) $8648

Quizplus · Accepted Answer

Under absorption costing, all manufacturing costs (direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead) are included in the cost of the product. The cost per unit is calculated as follows: Direct materials: $29 Direct labor: $8 Variable manufacturing overhead: $13 Fixed manufacturing overhead per unit: $16,600 / 580 units = $28.62 Total cost per unit = $29 + $8 + $13 + $28.62 = $78.62 Ending inventory is the cost of the units produced but not sold. Units in ending inventory = 580 units produced - 470 units sold = 110 units Ending inventory balance = 110 units * $78.62 per unit = $8648.20, rounded to $8648.

Sutherland, Inc There Are No Beginning Inventories