Hurlex Company produces a single product. last yar,Hurlex manufactured 15,000 un

Question

Hurlex Company produces a single product. last yar,Hurlex manufactured 15,000 units and sold 12,000 units. Production costs for the yar were as follows:
Directmaterials.....................................$150,000
Direct labor..........................................$180,000
Variable manufacturing overhead...........$135,000
Fixed manufacturing overhead................$210,000
Sales totaled $840,000 for the year, variable sellingexpenses totaled $60,000, and fixed selling andadministrative expenses totaled $180,000. There were no unitsin the beginning inventory. Assume that direct labor is avarialbe cost.

Under absorption costing, the carrying value on the balancesheet of the ending inventory for the year would be:
a) $135,000
b) $93,000
c)$105,000
d) $0
Hurlex Company produces a single product. last yar,Hurlex manufactured 15,000 units and sold 12,000 units. Production costs for the yar were as follows: Directmaterials.....................................$150,000 Direct labor..........................................$180,000 Variable manufacturing overhead...........$135,000 Fixed manufacturing overhead................$210,000 Sales totaled $840,000 for the year, variable sellingexpenses totaled $60,000, and fixed selling andadministrative expenses totaled $180,000. There were no unitsin the beginning inventory. Assume that direct labor is avarialbe cost. Under absorption costing, the carrying value on the balancesheet of the ending inventory for the year would be: a) $135,000 b) $93,000 c)$105,000 d) $0

Explanation / Answer

Cost of goods manufactured under Absorption Costing /Full Costing method ========================================================= DirectMaterials                                                            $150,000 DirectLabor                                                                 $180,000 Variable Manufacturingoverheads                                 $135,000 Fixed Manufacturingoverheads                                     $210,000                                                                               _______________ Total Cost of goodsmanufactured                            $675,000 GoodsManufactured                                                        15,000units Cost perunit                                                                      $45 Cost of EndingInventory   (15,000 -12,000)         3,000 unitsx$45   =   $135,000     

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