Summit Manufacturing produces snow shovels. The selling price per snow shovel is 30.00. There is no...

Summit Manufacturing produces snow shovels. The selling price per snow shovel is 30.00. There is no beginning inventory.

Costs involved in production are:

Direct Material $5.00

Direct Labor $4.00

Variable Manufacturing overhead $3.00

Total Variable Manufacturing Costs per Unit $12.00

Fixed Manufacturing overhead per year $180,000

In addition the company has fixed selling and administrative costs of $160,000 per year.

During the year Summit produces 50,000 snow shovels and sells 45,000 snow shovels.

What is the value of ending inventory using full costing?

Expert Solution

The value of ending inventory using full costing
Direct material	5.00
Direct labor	4.00
Variable Manufacturing overhead	3.00
Fixed Manufacturing overhead per unit [$180,000 / 50,000 units]	3.60
Product cost per unit	15.60
Ending inventory units [50,000 units - 40,000 units]	5,000

The value of ending inventory using full costing [5,000 units x $15.60 per unit]	78,000

Therefore, the value of ending inventory using full costing will be $78,000

ekkarill92 answered 3 years ago

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