Question: Sierra Company incurs the following costs to produce and sell a single product: Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead $12 8 4 Variable selling and administrative expenses 4 Fixed costs per year: Fixed manufacturing overhead $93,750 Fixed selling and administrative expenses 315,000 During the last year, 31,250 units were produced and 25,250 units were sold. The Finished Goods inventory account at the end of the year shows a balance of $144,000 for the 6,000 unsold units. Required: 1. Determine whether the company is using absorption costing or variable costing to cost units in the Finished Goods inventory account. 2. Calculate the ending balance in the Finished Goods inventory account under. ⚫ a) variable costing. • b) absorption costing. 3. Prepare financial statements for the year, to issue to its stockholders. 4. At what dollar amount should the 6,000 units be carried in the inventory, for external reporting purposes?

Question: Sierra Company incurs the following costs to produce and sell a single product: Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead $12 8 4 Variable selling and administrative expenses 4 Fixed costs per year: Fixed manufacturing overhead $93,750 Fixed selling and administrative expenses 315,000 During the last year, 31,250 units were produced and 25,250 units were sold. The Finished Goods inventory account at the end of the year shows a balance of $144,000 for the 6,000 unsold units. Required: 1. Determine whether the company is using absorption costing or variable costing to cost units in the Finished Goods inventory account. 2. Calculate the ending balance in the Finished Goods inventory account under. ⚫ a) variable costing. • b) absorption costing. 3. Prepare financial statements for the year, to issue to its stockholders. 4. At what dollar amount should the 6,000 units be carried in the inventory, for external reporting purposes?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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