5:Bettina Company incurs the following costs to produce and sell a single product. Variable costs per unit: Direct materials $15 Direct labor$7.5 Variable manufacturing overhead$3 Variable selling and administrative expenses$6 Fixed costs per year: Fixed manufacturing overhead . . . . . . . . . . . . . . . . . $45,000 Fixed selling and administrative expenses . . . . . . . $150,000 During the last year, 15,000 units were produced and 12,500 units were sold. The Finished Goods inventory account at the end of the year shows a balance of $63,750 for the 2,500 unsold units. Required: 1. Is the company using absorption costing or variable costing to cost units in the Finished Goods inventory account? Show computations to support your answer. 2. Assume that the company wishes to prepare financial statements for the year to issue to its stockholders. a. Is the $63,750 figure for Finished Goods inventory the corr
5:Bettina Company incurs the following costs to produce and sell a single product. Variable costs per unit: Direct materials $15 Direct labor$7.5 Variable manufacturing overhead$3 Variable selling and administrative expenses$6 Fixed costs per year: Fixed manufacturing overhead . . . . . . . . . . . . . . . . . $45,000 Fixed selling and administrative expenses . . . . . . . $150,000 During the last year, 15,000 units were produced and 12,500 units were sold. The Finished Goods inventory account at the end of the year shows a balance of $63,750 for the 2,500 unsold units. Required: 1. Is the company using absorption costing or variable costing to cost units in the Finished Goods inventory account? Show computations to support your answer. 2. Assume that the company wishes to prepare financial statements for the year to issue to its stockholders. a. Is the $63,750 figure for Finished Goods inventory the corr
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Q – 5:
Bettina Company incurs the following costs to produce and sell a single product.
Variable costs per unit:
Direct materials $15
Direct labor$7.5
Variable manufacturing overhead$3
Variable selling and administrative expenses$6
Fixed costs per year:
Fixed manufacturing overhead . . . . . . . . . . . . . . . . . $45,000
Fixed selling and administrative expenses . . . . . . . $150,000
During the last year, 15,000 units were produced and 12,500 units were sold. The Finished Goods inventory account at the end of the year shows a balance of $63,750 for the 2,500 unsold units.
Required:
1. Is the company using absorption costing or variable costing to cost units in the Finished Goods inventory account? Show computations to support your answer.
2. Assume that the company wishes to prepare financial statements for the year to issue to its stockholders.
a. Is the $63,750 figure for Finished Goods inventory the correct amount to use on these statements for external reporting purposes? Explain.
b. At what dollar amount should the 2,500 units be carried in inventory for external reporting purposes?
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