The carrying value of finished goods inventory at the end of the year under variable costing would be:
A)$8,800 greater than under absorption costing.
B)$8,800 less than under absorption costing.
C)$5,800 less than under absorption costing.
D)The same as absorption costing.

Question

Quizplus · Accepted Answer

Fixed manufacturing overhead per unit = Fixed manufacturing overhead F1F1F1S1F1F1F10 Units produced
= $145,000 F1F1F1S1F1F1F10 5,000 units = $29 per unit
Change in units in inventory = Units produced - Units sold = 5,000 units - 4,800 units = 200 units
Since inventories increased by 200 units,fixed manufacturing overhead is deferred in inventories and absorption costing net operating income will be greater than variable costing net operating income.
Manufacturing overhead deferred in inventory = Fixed manufacturing overhead per unit F1F1F1S1F1F1F10 Increase in units in inventory = $29 per unit F1F1F1S1F1F1F10 200 unit increase = $5,800

The Carrying Value of Finished Goods Inventory at the End