The following information pertains to Nute Corporation:
$$\begin{array} { l r }
\text { Beginning inventory } & 1,000 \text { units } \
\text { Ending inventory } & 6,000 \text { units } \
\text { Direct labour per unit } & \$ 40 \
\text { Direct materials per unit } & 20 \
\text { Variable overhead per unit } & 10 \
\text { Fixed overhead per unit } & 30 \
\text { Variable selling and administrative costs per unit } & 6 \
\text { Fixed selling and administrative costs per unit } & 14
\end{array}$$
-Refer to the Figure.What is the value of the ending inventory using the absorption costing method?
A)$240,000
B)$360,000
C)$420,000
D)$600,000

Question

The following information pertains to Nute Corporation:
 $$\begin{array} { l r } 
\text { Beginning inventory } & 1,000 \text { units } \
\text { Ending inventory } & 6,000 \text { units } \
\text { Direct labour per unit } & \$ 40 \
\text { Direct materials per unit } & 20 \
\text { Variable overhead per unit } & 10 \
\text { Fixed overhead per unit } & 30 \
\text { Variable selling and administrative costs per unit } & 6 \
\text { Fixed selling and administrative costs per unit } & 14
\end{array}$$
-Refer to the Figure.What is the value of the ending inventory using the absorption costing method?
A)$240,000
B)$360,000
C)$420,000
D)$600,000

Quizplus · Accepted Answer

Under absorption costing, ending inventory is valued by including direct materials, direct labor, variable overhead, and fixed overhead. The cost per unit is $100 ($20 + $40 + $10 + $30). Therefore, the ending inventory value is 6,000 units * $100 = $600,000.

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