The following information pertains to Shark Corporation:
$$\begin{array} { l r }
\text { Beginning inventory } & 0 \text { units } \
\text { Ending inventory } & 6,000 \text { units } \
\text { Direct labour per unit } & \$ 2022 \
\text { Direct materials per unit } & 1618 \
\text { Variable overhead per unit } & 48 \
\text { Fixed overhead per unit } & 1012 \
\text { Variable selling costs per unit } & 1214 \
\text { Fixed selling costs per unit } & 1618
\end{array}$$
-Refer to the Figure.What is the value of ending inventory when using the absorption-costing method?
A)$200,000
B)$348,000
C)$368,000
D)$390,000

Question

The following information pertains to Shark Corporation:
 $$\begin{array} { l r } 
\text { Beginning inventory } & 0 \text { units } \
\text { Ending inventory } & 6,000 \text { units } \
\text { Direct labour per unit } & \$ 2022 \
\text { Direct materials per unit } & 1618 \
\text { Variable overhead per unit } & 48 \
\text { Fixed overhead per unit } & 1012 \
\text { Variable selling costs per unit } & 1214 \
\text { Fixed selling costs per unit } & 1618
\end{array}$$
-Refer to the Figure.What is the value of ending inventory when using the absorption-costing method?
A)$200,000
B)$348,000
C)$368,000
D)$390,000

Quizplus · Accepted Answer

The absorption-costing method includes fixed manufacturing costs as part of the product cost. The ending inventory is valued at the total manufacturing cost, which includes both variable and fixed manufacturing costs. The total manufacturing cost per unit is $2022 + $1618 + $48 + $1012 = $3680. The ending inventory value is 6,000 units x $3680 = $348,000.

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